Annual Report Financial Statements

KIRIN HOLDINGS COMPANY, LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 2011
TOGETHER WITH INDEPENDENT AUDITORS’ REPORT
Consolidated Balance Sheets
Kirin Holdings Company, Limited and Consolidated Subsidiaries
December 31, 2011 and 2010
Thousands of U.S.
Millions of yen dollars (Note 1)
ASSETS 2011 2010 2011
Current Assets
Cash (Notes 3 and 22) ¥76,218 ¥51,463 $980,421
Notes and accounts receivable, trade (Note 3) 406,448 415,268 5,228,299
Merchandise and finished goods 112,986 129,704 1,453,383
Work in process 30,937 19,917 397,954
Raw materials and supplies 49,059 38,191 631,065
Deferred tax assets (Note 23) 26,303 27,598 338,345
Other 62,361 46,884 802,173
Allowance for doubtful accounts (6,250) (1,939) (80,396)
Total Current Assets 758,065 727,088 9,751,286
Non-current Assets
Property, plant and equipment (Notes 3 and 4)
(Net of accumulated depreciation and accumulated loss from impairment)
Buildings and structures 247,950 227,330 3,189,477
Machinery, equipment and vehicles 233,271 187,436 3,000,656
Land (Note 28) 201,436 225,246 2,591,149
Construction in progress 47,529 61,103 611,384
Other 33,644 38,117 432,775
Total 763,833 739,235 9,825,482
Intangible Assets
Goodwill 713,749 562,492 9,181,232
Other 102,511 95,864 1,318,639
Total 816,261 658,357 10,499,884
Investments and Other Assets (Note 3)
Investment securities (Notes 16, 19 and 24) 417,619 428,383 5,371,996
Deferred tax assets (Note 23) 42,234 45,916 543,272
Other (Note 19) 62,922 57,645 809,390
Allowance for doubtful accounts (6,681) (7,430) (85,940)
Total 516,094 524,515 6,638,718
Total Non-current Assets 2,096,189 1,922,108 26,964,098
Total Assets ¥2,854,254 ¥2,649,197 $36,715,384
The accompanying notes are an integral part of these consolidated financial statements.
1
Thousands of U.S.
Millions of yen dollars (Note 1)
LIABILITIES 2011 2010 2011
Current Liabilities
Notes and accounts payable, trade ¥146,955 ¥169,036 $1,890,339
Short-term loans payable and long-term debt with current maturities
(Note 3) 85,517 181,786 1,100,038
Commercial papers (Note 3) 121,989 10,999 1,569,192
Bonds due within one year 23,111 3,361 297,285
Liquor taxes payable 91,800 92,553 1,180,859
Income taxes payable 26,783 26,544 344,520
Allowance for employees’ bonuses 5,552 6,367 71,417
Allowance for bonuses for directors and corporate auditors 246 237 3,164
Reserve for repairs and maintenance (Note 2 (13)) - 601 -
Accrued expenses 92,423 88,166 1,188,873
Other 121,039 100,039 1,556,971
Total Current Liabilities 715,419 679,695 9,202,714
Non-current Liabilities
Bonds (Note 3) 365,487 320,070 4,701,402
Long-term debt (Note 3) 468,999 262,720 6,032,917
Deferred tax liabilities (Note 23) 21,811 21,468 280,563
Deferred tax liability due to land revaluation (Notes 23 and 28) 1,286 1,471 16,542
Employees’ pension and retirement benefits (Note 26) 65,516 66,882 842,757
Retirement benefits for directors and corporate auditors 260 302 3,344
Reserve for repairs and maintenance of vending machines (Note 2 (16)) 4,908 4,738 63,133
Reserve for environmental measures (Note 2 (18)) 2,125 1,172 27,334
Reserve for loss on litigation (Note 2 (19)) 22,078 - 283,997
Deposits received (Note 3) 73,222 73,663 941,883
Other 65,243 57,974 839,246
Total Non-current Liabilities 1,090,939 810,464 14,033,174
Total Liabilities 1,806,359 1,490,160 23,235,901
NET ASSETS
Shareholders’ Equity (Note 20)
Common stock
Authorized - 1,732,026,000 shares
Issued - 965,000,000 shares in 2011 and 2010 ¥102,045 ¥102,045 $1,312,644
Capital surplus 81,417 81,412 1,047,298
Retained earnings 801,856 821,519 10,314,587
Treasury stock, at cost
3,268,428 shares in 2011 and 3,010,208 shares in 2010 (3,271) (2,985) (42,076)
Total Shareholders’ Equity 982,048 1,001,992 12,632,467
Accumulated Other Comprehensive Income
Net unrealized gains on securities 11,116 7,252 142,989
Deferred gains or losses on hedges (279) 1,285 (3,588)
Land revaluation difference (Note 28) (2,543) (4,713) (32,711)
Foreign currency translation adjustments (137,419) (43,341) (1,767,674)
Total Accumulated Other Comprehensive Income (129,126) (39,516) (1,660,998)
Subscription Rights to Shares 250 207 3,215
Minority Interests 194,722 196,352 2,504,785
Total Net Assets 1,047,895 1,159,036 13,479,482
Total Liabilities and Net Assets ¥2,854,254 ¥2,649,197 $36,715,384
The accompanying notes are an integral part of these consolidated financial statements.
2
Consolidated Statements of Income
Kirin Holdings Company, Limited and Consolidated Subsidiaries
For the years ended December 31, 2011, 2010 and 2009
Thousands of U.S.
Millions of yen dollars (Note 1)
2011 2010 2009 2011
Sales ¥2,071,774 ¥2,177,802 ¥2,278,473 $26,650,038
Less liquor taxes 323,375 342,527 359,743 4,159,698
Net sales 1,748,399 1,835,274 1,918,730 22,490,339
Cost of sales 895,477 972,282 1,024,078 11,518,870
Gross profit 852,922 862,992 894,652 10,971,468
Selling, general and administrative expenses (Note 6) 710,058 711,380 766,216 9,133,753
Operating income 142,864 151,612 128,435 1,837,715
Non-operating income
Interest income 3,880 1,223 2,573 49,909
Dividend income 4,757 3,616 5,573 61,191
Equity in earnings of affiliates 10,541 9,479 8,902 135,593
Foreign currency translation gain (Note 8) - - 18,909 -
Other 3,952 6,650 6,656 50,836
Total 23,133 20,970 42,615 297,568
Non-operating expenses
Interest expense 20,915 22,047 19,617 269,037
Foreign currency translation loss (Note 8) - 4,908 - -
Other 8,264 4,656 6,818 106,303
Total 29,179 31,613 26,435 375,340
Ordinary income 136,818 140,969 144,614 1,759,943
Special income
Gain on sale of fixed assets 21,322 7,950 8,054 274,273
Gain on sale of investment securities (Note 16) 1,619 14,716 34,631 20,825
Gain on sale of shares of subsidiaries and affiliates 15,399 122 1,005 198,083
Gain on negative goodwill - 7,564 - -
Reversal of removal costs (Note 9) - 6,380 - -
Other 6,433 3,114 862 82,750
Total 44,776 39,850 44,553 575,971
Special expenses
Loss on disposal of fixed assets 2,651 6,637 5,997 34,100
Loss on sale of fixed assets 2,738 1,710 2,007 35,219
Loss on impairment (Note 7) 16,895 42,885 38,843 217,326
Loss on devaluation of investment securities (Note 16) 24,119 1,612 8,363 310,252
Loss on sale of investment securities (Note 16) 692 132 2,038 8,901
Loss on sale of shares of subsidiaries and affiliates 4,396 6,630 21,661 56,547
Loss on reversal of foreign currency translation adjustments due to
- 7,568 - -
liquidation of a foreign subsidiary
Business restructuring expense (Note 13) 6,073 7,155 1,513 78,119
Expenses of reserve for loss on liquidation of business (Note 2 (12)) - - 2,628 -
Expenses for integration (Note 14) - - 5,623 -
Non-recurring depreciation of fixed assets (Note 2 (8)) - - 3,299 -
Loss on devaluation of inventories (Note 2 (6)) - - 942 -
Loss on revision of retirement benefit plan (Note 10) - 7,226 - -
Loss on prior period adjustments (Note 11) - 5,300 - -
Loss related to the Great East Japan Earthquake (Note 12) 19,832 - - 255,106
Other 19,276 13,630 3,635 247,954
Total 96,675 100,492 96,554 1,243,568
3
Thousands of U.S.
Millions of yen dollars (Note 1)
2011 2010 2009 2011
Income before income taxes and minority interests 84,918 80,327 92,613 1,092,333
Income taxes - current 56,578 55,077 57,023 727,784
Income taxes - deferred 5,088 1,576 (28,108) 65,448
Income taxes for prior years - deferred (Note 11) - 1,169 - -
Total 61,666 57,823 28,914 793,233
Income before minority interests 23,251 22,503 63,699 299,086
Minority interests 15,844 11,109 14,526 203,807
Net income ¥7,407 ¥11,394 ¥49,172 $95,279
U.S. dollars
Yen (Note 1)
Earnings per share
Basic ¥7.70 ¥11.95 ¥51.54 $0.09
Diluted 7.14 11.93 - 0.09
Cash dividends per share applicable to the year ¥27.00 ¥25.00 ¥23.00 $0.34
The accompanying notes are an integral part of these consolidated financial statements.
4
Consolidated Statement of Comprehensive Income
Kirin Holdings Company, Limited and Consolidated Subsidiaries
For the year ended December 31, 2011
Thousands of U.S.
Millions of yen dollars (Note 1)
2011 2011
Income before minority interests ¥23,251 $299,086
Other comprehensive income (Note 15)
Net unrealized gains on securities 2,610 33,573
Deferred gains or losses on hedges (1,465) (18,844)
Land revaluation difference 109 1,402
Foreign currency translation adjustments (86,939) (1,118,330)
Share of other comprehensive income of associates accounted for by
the equity method (9,487) (122,034)
Total other comprehensive income (95,172) (1,224,234)
Comprehensive income (Note 15) ¥(71,920) $(925,135)
Comprehensive income attributable to (Note 15):
Owners of the parent ¥(84,589) $(1,088,101)
Minority interests 12,669 162,966
The accompanying notes are an integral part of these consolidated financial statements.
5
Consolidated Statements of Changes in Net Assets
Kirin Holdings Company, Limited and Consolidated Subsidiaries
For the years ended December 31, 2011, 2010 and 2009
Thousands of U.S.
Millions of yen dollars (Note 1)
2011 2010 2009 2011
Shareholders’ Equity
Common stock
Number of shares (Thousands of shares) (Note 21)
Balance at beginning of year 965,000 984,508 984,508
Balance at end of year 965,000 965,000 984,508
Amount
Balance at beginning of year ¥102,045 ¥102,045 ¥102,045 $1,312,644
Balance at end of year ¥102,045 ¥102,045 ¥102,045 $1,312,644
Capital surplus
Additional paid-in capital:
Balance at beginning of year ¥81,412 ¥71,582 ¥71,536 $1,047,234
Issuance of new shares - 10,543 - -
Disposal of treasury stock 5 27 45 64
Retirement of treasury stock - (28,276) - -
Transfer to capital surplus from retained earnings - 27,535 - -
Balance at end of year ¥81,417 ¥81,412 ¥71,582 $1,047,298
Retained earnings
Retained earnings at beginning of year ¥821,519 ¥860,538 ¥839,248 $10,567,519
Change due to adoption of ASBJ Practical Issues Task Force (PITF)
- - (6,355) -
No.18 (Note 2 (26))
Change of items during the period
Dividends from surplus (Note 21) (25,009) (22,878) (21,949) (321,700)
Net income 7,407 11,394 49,172 95,279
Change in scope of consolidation - - (411) -
Increase due to merger - - 55 -
Prior year adjustments for deferred taxes etc. of foreign affiliates - - 778 -
Reversal of land revaluation difference on sale (Note 28) (2,060) - - (26,498)
Transfer to capital surplus from retained earnings - (27,535) - -
Total changes of items during the period (19,662) (39,019) 27,646 (252,919)
Retained earnings at end of year ¥801,856 ¥821,519 ¥860,538 $10,314,587
Treasury stock
Balance at beginning of year ¥(2,985) ¥(30,486) ¥(29,058) $(38,397)
Acquisition of treasury stock (544) (881) (1,625) (6,997)
Disposal of treasury stock 257 128 198 3,305
Retirement of treasury stock - 28,276 - -
Changes due to share exchange - (23) - -
Balance at end of year ¥(3,271) ¥(2,985) ¥(30,486) $(42,076)
Total Shareholders' Equity
Balance at beginning of year ¥1,001,992 ¥1,003,680 ¥983,772 $12,889,014
Change due to adoption of ASBJ Practical Issues Task Force (PITF)
No.18 (Note 2 (26)) - - (6,355) -
Changes of items during the period
Issuance of new shares - 10,543 - -
Dividends from surplus (Note 21) (25,009) (22,878) (21,949) (321,700)
Net income 7,407 11,394 49,172 95,279
Change in scope of consolidation - - (411) -
Increase due to merger - - 55 -
Prior year adjustments for deferred taxes etc. of foreign affiliates - - 778 -
Acquisition of treasury stock (544) (881) (1,625) (6,997)
Disposal of treasury stock 262 156 243 3,370
Retirement of treasury stock - - - -
Reversal of land revaluation difference on sale (Note 28) (2,060) - - (26,498)
Changes due to share exchange - (23) - -
Transfer to capital surplus from retained earnings - - - -
Total (19,944) (1,687) 26,264 (256,547)
Balance at end of year ¥982,048 ¥1,001,992 ¥1,003,680 $12,632,467
6
Accumulated Other Comprehensive Income
Net unrealized gains on securities
Balance at beginning of year ¥7,252 ¥18,279 ¥37,430 $93,285
Net changes of items during the period 3,863 (11,027) (19,150) 49,691
Balance at end of year ¥11,116 ¥7,252 ¥18,279 $142,989
Deferred gains or losses on hedges
Balance at beginning of year ¥1,285 ¥(1,548) ¥79 $16,529
Net changes of items during the period (1,565) 2,834 (1,628) (20,131)
Balance at end of year ¥(279) ¥1,285 ¥(1,548) $(3,588)
Land revaluation difference (Note 28)
Balance at beginning of year ¥(4,713) ¥(4,713) ¥(4,713) $(60,625)
Net changes of items during the period 2,169 - - 27,900
Balance at end of year ¥(2,543) ¥(4,713) ¥(4,713) $(32,711)
Foreign currency translation adjustments
Balance at beginning of year ¥(43,341) ¥(34,375) ¥(88,756) $(557,512)
Net changes of items during the period (94,077) (8,966) 54,380 (1,210,149)
Balance at end of year ¥(137,419) ¥(43,341) ¥(34,375) $(1,767,674)
Total Accumulated Other Comprehensive Income
Balance at beginning of year ¥(39,516) ¥(22,357) ¥(55,959) $(508,309)
Change of items during the period
Net changes of items during the period (89,609) (17,158) 33,602 (1,152,675)
Total (89,609) (17,158) 33,602 (1,152,675)
Balance at end of year ¥(129,126) ¥(39,516) ¥(22,357) $(1,660,998)
Subscription Rights to Shares
Balance at beginning of year ¥207 ¥196 ¥162 $2,662
Net changes of items during the period 42 11 33 540
Balance at end of year ¥250 ¥207 ¥196 $3,215
Minority Interests
Balance at beginning of year ¥196,352 ¥217,350 ¥222,023 $2,525,752
Net changes of items during the period (1,629) (20,997) (4,672) (20,954)
Balance at end of year ¥194,722 ¥196,352 ¥217,350 $2,504,785
Total Net Assets
Balance at beginning of year ¥1,159,036 ¥1,198,869 ¥1,149,998 $14,909,133
Change due to adoption of ASBJ Practical Issues Task Force (PITF)
No.18 (Note 2 (26)) - - (6,355) -
Changes of items during the period
Issuance of new shares - 10,543 - -
Dividends from surplus (Note 21) (25,009) (22,878) (21,949) (321,700)
Net income 7,407 11,394 49,172 95,279
Change in scope of consolidation - - (411) -
Increase due to merger - - 55 -
Prior year adjustments for deferred taxes etc. of foreign affiliates - - 778 -
Acquisition of treasury stock (544) (881) (1,625) (6,997)
Disposal of treasury stock 262 156 243 3,370
Retirement of treasury stock - - - -
Reversal of land revaluation difference on sale (Note 28) (2,060) - - (26,498)
Changes due to share exchange - (23) - -
Transfer to capital surplus from retained earnings - - - -
Net changes of items during the period (91,197) (38,145) 28,963 (1,173,102)
Total (111,141) (39,833) 55,227 (1,429,650)
Balance at end of year ¥1,047,895 ¥1,159,036 ¥1,198,869 $13,479,482
The accompanying notes are an integral part of these consolidated financial statements.
7
Consolidated Statements of Cash Flows
Kirin Holdings Company, Limited and Consolidated Subsidiaries
For the years ended December 31, 2011, 2010 and 2009
Thousands of
U.S. dollars
Millions of yen (Note 1)
2011 2010 2009 2011
Cash flows from operating activities
Income before income taxes and minority interests ¥84,918 ¥80,327 ¥92,613 $1,092,333
Adjustments to reconcile income before income taxes and minority interests
to net cash provided by operating activities:
Depreciation and amortization 103,871 105,259 105,874 1,336,133
Loss on impairment 16,895 42,885 38,843 217,326
Amortization of goodwill 38,891 34,728 21,627 500,270
Gain on negative goodwill - (7,564) - -
Increase (decrease) in employees' pension and retirement benefits 1,262 (17,684) 2,796 16,233
Interest and dividend income (8,638) (4,840) (8,147) (111,113)
Equity in earnings of affiliates (10,541) (9,479) (8,902) (135,593)
Interest expense 20,915 22,047 19,617 269,037
Foreign currency translation loss (gain) (29) 2,178 (18,339) (373)
Gain on sale of fixed assets (21,322) (7,950) (8,054) (274,273)
Gain on sale of investment securities (1,619) (14,716) (34,631) (20,825)
Gain on sale of shares of subsidiaries and affiliates (15,399) - - (198,083)
Loss on disposal and sale of fixed assets 4,538 8,348 8,004 58,374
Loss on sale of shares of subsidiaries and affiliates 4,396 6,630 21,661 56,547
Loss on devaluation of investment securities 24,119 1,612 8,363 310,252
Decrease (increase) in notes and accounts receivable, trade 2,622 4,618 32,096 33,727
Decrease (increase) in inventories (2,941) 4,915 22,120 (37,831)
Increase (decrease) in notes and accounts payable, trade (11,005) 4,299 (25,577) (141,561)
Increase (decrease) in liquor taxes payable (3,310) (7,018) (4,706) (42,577)
Increase (decrease) in consumption taxes payable 1,955 (3,092) (6,140) 25,147
Increase (decrease) in deposits received 8,067 (11,878) (4,032) 103,768
Other 27,311 25,572 414 351,312
Sub-total 264,958 259,197 255,502 3,408,258
Interest and dividends received 18,895 14,308 23,465 243,053
Interest paid (20,808) (22,008) (20,153) (267,661)
Income taxes paid (66,253) (33,471) (68,906) (852,238)
Net cash provided by operating activities 196,792 218,025 189,907 2,531,412
Cash flows from investing activities
Payment for purchases of property, plant and equipment and intangible (79,830) (106,650) (110,246) (1,026,884)
assets
Proceeds from sale of property, plant and equipment and intangible assets 29,405 23,757 31,705 378,248
Payment for purchases of marketable securities and investment securities (44,326) (86,973) (137,318) (570,182)
Proceeds from sale and redemption of marketable securities and investment 12,895 33,174 152,365 165,873
securities
Payment for purchases of shares of subsidiaries (886) (6,659) (263,034) (11,396)
Payment for acquisition of shares of newly consolidated subsidiaries (344,355) - - (4,429,572)
(Note 22)
Proceeds from sale of shares of subsidiaries excluded from the scope of 70,423 726 6,061 905,878
consolidation (Note 22)
Other (4,983) 1,706 (1,187) (64,098)
Net cash used in investing activities (361,658) (140,917) (321,654) (4,652,148)
Cash flows from financing activities
Increase (decrease) in short-term loans payable (103,193) (40,769) 82,675 (1,327,411)
Increase (decrease) in commercial paper 110,989 10,999 - 1,427,694
Proceeds from long-term debt 283,366 58,281 147,059 3,645,047
Repayment of long-term debt (117,586) (131,017) (56,684) (1,512,554)
Proceeds from issuance of bonds 70,000 - 100,000 900,437
Payment for redemption of bonds (5,014) (16,071) (44,273) (64,497)
Payment to minority shareholders for capital reduction of consolidated - (2,058) - -
subsidiaries
Proceeds from the settlements of derivatives - 12,585 - -
Payment for acquisition of treasury stock (544) (881) (1,625) (6,997)
Proceeds from sale of treasury stock 244 156 243 3,138
Payment for acquisition of treasury stock by a consolidated subsidiary (12,582) - (4,747) (161,847)
Cash dividends paid (25,009) (22,878) (21,949) (321,700)
Cash dividends paid to minority shareholders (6,086) (5,183) (26,645) (78,286)
Other (1,368) (3,360) 155 (17,597)
Net cash provided by (used in) financing activities 193,214 (140,197) 174,208 2,485,387
Effect of exchange rate fluctuations on cash and cash equivalents (2,833) (10,412) 9,091 (36,441)
Net increase (decrease) in cash and cash equivalents 25,513 (73,501) 51,553 328,183
Cash and cash equivalents at beginning of year 45,278 118,797 68,457 582,428
Net increase (decrease) in cash and cash equivalents from new - (17) (1,505) -
consolidation/de-consolidation of subsidiaries
Net increase (decrease) in cash and cash equivalents from merger of 55 - 292 707
consolidated subsidiaries
Cash and cash equivalents at end of year (Note 22) ¥70,847 ¥45,278 ¥118,797 $911,332
The accompanying notes are an integral part of these consolidated financial statements.
8
Notes to Consolidated Financial Statements
Kirin Holdings Company, Limited and Consolidated Subsidiaries
December 31, 2011, 2010 and 2009
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Kirin Holdings Company, Limited (the "Company") and its consolidated subsidiaries have
been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law of Japan and its related accounting
regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of International Financial Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting
principles prevailing in their respective countries of domicile. Effective the year ended December 31, 2009, the Company adopted “Practical
Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (PITF No. 18, issued by
Accounting Standards Board of Japan (ASBJ) on May 17, 2006). In accordance with PITF No. 18, the accompanying consolidated financial
statements have been prepared by using the accounts of foreign consolidated subsidiaries prepared in accordance with either IFRS or accounting
principles generally accepted in the United States. The accompanying consolidated financial statements have been restructured and translated into
English from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate
Local Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law of Japan. Some supplementary information
included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the
accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars in the accompanying consolidated financial statements are included solely for the
convenience of readers outside Japan, using the prevailing exchange rate on December 31, 2011, which was ¥77.74 to U.S. $1. The convenience
translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be,
converted into U.S. dollars at this or any other rate of exchange.
Fractions less than one million yen have been omitted. As a result, the total amounts in Japanese yen and translated U.S. dollars shown in the
consolidated financial statements and notes to the consolidated financial statements do not necessarily agree with the sum of the individual
amounts.
2. SIGNIFICANT ACCOUNTING POLICIES
(1) CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Company and all significant subsidiaries that are controlled
through substantial ownership of majority voting rights or through certain other means. All significant inter-company balances and transactions
have been eliminated in the consolidation. In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including
the portion attributable to minority shareholders, are evaluated using the fair value at the time when the Company acquired control of the respective
subsidiaries.
Differences between the acquisition costs and the underlying net equities of investments in consolidated subsidiaries are recorded as goodwill in the
consolidated balance sheets and amortized using the straight-line method over periods mainly between 10 and 20 years for fiscal years 2010 and
2009, and between 15 and 20 years for fiscal year 2011. Any immaterial amounts are fully recognized as expenses as incurred.
The number of consolidated subsidiaries was as follows:
Number of companies at year-end
2011 2010 2009
Consolidated subsidiaries 263 259 285
Changes in the scope of consolidation during the year ended December 31, 2011 are as follows:
(a) Due to new establishment, 1 subsidiary of Kirin Beverage Co., Ltd., Kirin Holdings Investments Brasil Participações S.A., and Kirin Holdings
USA, Inc. became consolidated subsidiaries.
(b) Due to new acquisition, 11 subsidiaries of Kyowa Hakko Kirin Co., Ltd., Trade Ocean Holdings Sdn. Bhd. and 2 subsidiaries of Trade Ocean
Holdings Sdn. Bhd., WONDERFARM Biscuits & Confectionary Sdn. Bhd., and 20 subsidiaries of Kirin Holdings Investments Brasil
Participações S.A. became consolidated subsidiaries. Trade Ocean Holdings Sdn. Bhd. is a holding company which has Interfood
Shareholding Company and others as subsidiaries, and Kirin Holdings Investments Brasil Participações S.A. is a holding company which has
Schincariol Participações e Representações S.A. and others as subsidiaries.
(c) Due to additional investment, 1 subsidiary of LION PTY LTD became a consolidated subsidiary.
(d) Due to sale of shares, 8 subsidiaries of LION PTY LTD, 3 subsidiaries of Kyowa Hakko Kirin Co., Ltd., Kirin Australia Pty. Ltd., 2
subsidiaries of Mercian Corp., and 4 subsidiaries of Kirin Beverage Co., Ltd. were excluded from the consolidation scope.
9
(e) Due to merger, 11 subsidiaries of Kirin Logistics Co., Ltd., 1 subsidiary of Kyowa Hakko Kirin Co., Ltd., and 4 subsidiaries of LION PTY
LTD were excluded from the consolidation scope.
(f) Due to liquidation, 1 subsidiary of Kirin Engineering Co., Ltd. was excluded from the consolidation scope.
Changes in the scope of consolidation during the year ended December 31, 2010 are as follows:
(a) Due to new establishment, Shinshu Beverage Co., Ltd., Kirin Holdings Singapore Pte.Ltd., 2 subsidiaries of Kyowa Hakko Kirin Co., Ltd., 1
subsidiary of Mercian Corporation, and 1 other subsidiary became consolidated subsidiaries.
(b) Due to new acquisition, 1 subsidiary of Lion Nathan National Foods Pty Ltd. became a consolidated subsidiary.
(c) Due to sale of shares, 1 subsidiary of Lion Nathan National Foods Pty Ltd., 1 subsidiary of Mercian Corporation, NAGANO TOMATO Co.,
Ltd., Kirin Agribio Co. Ltd., Japan Potato Co., Ltd., Kirin Agribio Shanghai Co., Ltd., Kirin Agribio EC B.V. and 22 subsidiaries of Kirin
Agribio EC B.V. were excluded from the consolidation scope.
(d) Due to liquidation, 1 subsidiary of Mercian Corporation and Kirin Holdings Netherlands B.V. were excluded from the consolidation scope.
(e) Due to merger, 1 subsidiary of Lion Nathan National Foods Pty Ltd. and 1 subsidiary of Kirin Kyowa Foods Co., Ltd. were excluded from the
consolidation scope.
Certain subsidiaries, including Chiyoda Transportation Co., Ltd, are excluded from the scope of consolidation because the effect of the Company’s
share of their sales, net income or losses, total assets and retained earnings as of and for the year ended 2011 is immaterial. Certain subsidiaries,
including Koiwai Shokuhin Corporation, are excluded from the scope of consolidation because the effect of the Company’s share of their sales, net
income or losses total assets and retained earnings as of and for the year ended 2010 is immaterial.
Fiscal year-ends of the following consolidated subsidiaries are different from that of the Company:
2011
Consolidated subsidiaries Fiscal year-end
LION PTY LTD (formerly Lion Nathan National Foods Pty Ltd.) September 30 (i)
and its subsidiaries
2010
Consolidated subsidiaries Fiscal year-end
Lion Nathan National Foods Pty Ltd. and its subsidiaries September 30 (i)&(ii)
(i) The Company used the financial statements of the companies as of their fiscal year-ends and for the years then ended for consolidation and
made necessary adjustments for major transactions between the fiscal year-ends of the consolidated subsidiaries and fiscal year-end of the
Company.
(ii) For the purpose of the further promotion of the Company’s integrated beverages group strategy in Oceania, the Company made Lion
Nathan Ltd. (“LN”) a wholly-owned subsidiary in October 2009. At the same time, in order that Lion Nathan National Foods Pty Ltd
(“LNNF”) manages all Oceania operations on a unified basis, National Foods Limited (“NFL”), LN and their subsidiaries became
subsidiaries of LNNF. The Company harmonised the fiscal year-ends of LNNF, NFL and its subsidiaries (“the companies”) from
December 31 to September 30 from fiscal year 2010.
To prepare the consolidated financial statements, financial statements of the companies as of September 30, 2010 are used because the
difference between the Company’s and the companies’ year-ends does not exceed three months. However, the profit or loss of the
companies for the period from October 1, 2009 to December 31, 2009 is not included in the Company’s consolidated statement of income
for the fiscal year ended December 31, 2010 because their profit or loss for that period was included in the Company’s consolidated
statement of income for the fiscal year ended December 31, 2009.
Kyowa Hakko Kirin Co., Ltd. changed its fiscal year-end from March 31 to December 31 effective from the year ended December 31, 2009. As the
Company has used the preliminary financial statements of Kyowa Hakko Kirin Co., Ltd. as of its fiscal year-end and for the years then ended for
consolidation since Kyowa Hakko Kirin Co., Ltd. became a subsidiary, there is no effect on the consolidated net income or retained earnings of the
Company as of December 31, 2009.
(2) EQUITY METHOD
Investments in unconsolidated subsidiaries and affiliates (principally ownership interests of 20% to 50%) are accounted for by the equity method
and, accordingly, are stated at purchase cost adjusted for equity earnings and losses of the investments after elimination of unrealized inter-company
profits and losses from the date of acquisition of shares. The number of unconsolidated subsidiaries and affiliates accounted for by the equity
method was as follows:
Number of companies at year-end
2011 2010 2009
Unconsolidated subsidiaries and affiliates accounted for by the equity method 19 22 25
Changes in the scope of application of the equity method during the year ended December 31, 2011 are as follows:
(a) Due to additional acquisition of shares, Fraser and Neave Limited became an affiliate accounted for by the equity method.
10
(b) Due to new acquisition, 1 affiliate of Kyowa Hakko Kirin Co., Ltd. became an affiliate accounted for by the equity method.
(c) Due to new establishment, China Resources Kirin Beverages (Greater China) Company Limited became an affiliate accounted for by the
equity method.
(d) Due to sale of shares, 2 affiliates of Kyowa Hakko Kirin Co., Ltd., Dalian Daxue Brewery Co., Ltd., Tokita Seed Co., Ltd., and 1 affiliate of
Mercian Corp. were excluded from the scope of application of the equity method.
(e) Due to additional investment, 1 affiliate of LION PTY LTD became a consolidated subsidiary and was excluded from the scope of
application of the equity method.
Changes in the scope of application of the equity method during the year ended December 31, 2010 are as follows:
(a) Due to sale of shares, Verde Co., Ltd., Qingdao International Seeds Co., Ltd. and 1 subsidiary of Kirin Agribio EC B.V. were excluded from
the scope of application of the equity method.
Certain investments in unconsolidated subsidiaries, including Chiyoda Transportaion Co., Ltd. in 2011 and Koiwai Shokuhin Corporation in 2010
and 2009, and affiliates including Diamond Sports Club Co., Ltd. were not accounted for by the equity method and were stated at cost because the
effect of their net income or losses and retained earnings on the accompanying consolidated financial statements is immaterial.
Where fiscal year-ends of the affiliated companies accounted for by the equity method are different from that of the Company, the Company mainly
uses their financial statements as of their fiscal year-ends and for the years then ended for applying the equity method.
The Company accounts for SAN MIGUEL BREWERY INC. (fiscal year ended December 31) and China Resources Kirin Beverages (Greater
China) Co., Ltd. (fiscal year ended December 31) by the equity method. For the years ended December 31, 2011 and 2010, the Company recognized
SAN MIGUEL BREWERY INC. in equity of earnings of its financial statements based on the financial statements for 12 months from the fourth
quarter of the previous fiscal year to the third quarter of this fiscal year. China Resources Kirin Beverages (Greater China) Co., Ltd. is accounted for
by the equity method at the end of the third quarter of the fiscal year and its profit or loss is not accounted in the consolidated financial statements.
In 2009, the Company recognized its equity in the earnings of SAN MIGUEL BREWERY INC., which was acquired in the second quarter, based on
its third quarter financial statements. As a result, the consolidated statement of income of the Company for the year ended December 31, 2009
included the financial results of SAN MIGUEL BREWERY INC., for 6 months from April 1, 2009 to September 30, 2009.
It is difficult for the Company to prepare its consolidated financial statements based on the final year-end figures of the above two companies due to
the early disclosure of the consolidated business performance.
Effective from the year ended December 31, 2011, the Company has applied the “Accounting Standard for Equity Method of Accounting for
Investments” (ASBJ Statement No. 16 of March 10, 2008) and the “Practical Solution on Unification of Accounting Policies Applied to Associates
Accounted for Using the Equity Method” (ASBJ Practical Issues Task Force (PITF) No. 24 of March 10, 2008). There was no effect on operating
result from this application.
(3) FOREIGN CURRENCY TRANSLATION
(a) Translation of accounts
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the
exchange rates prevailing on the balance sheet date. Gains and losses resulting from the translation are recognized in the consolidated
statements of income as incurred.
(b) Financial statements denominated in foreign currencies
Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the year-end rate except for shareholders’ equity
accounts, which are translated at the historical rates. Income statements of consolidated overseas subsidiaries are translated at average rates
except for transactions with the Company, which are translated at the rates used by the Company.
(4) CASH AND CASH EQUIVALENTS
In preparing the consolidated statements of cash flows, cash on hand, readily available deposits and short-term highly liquid investments with
negligible risk of changes in value and maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.
(5) MARKETABLE AND INVESTMENT SECURITIES
The Company and its consolidated subsidiaries examine the intent of holding each security and classify those securities as (a) securities held for
trading purposes, (b) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt securities”), (c) equity securities issued by
subsidiaries and affiliated companies, or (d) all other securities that are not classified in any of the above categories (hereafter, “available-for-sale
securities”). The Company and its consolidated subsidiaries did not hold any security defined as (a) above as of December 31, 2011 and 2010.
Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by subsidiaries and affiliates that are not consolidated or
accounted for by the equity method are stated at the moving-average cost. Available-for-sale securities with fair market value are stated at fair
market value as of the balance sheet date. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate
11
component of net assets. Realized gains and losses on sale of such securities are computed using the moving-average method. Available-for-sale
securities without fair market value are stated at the moving-average cost.
If the market value of held-to-maturity debt securities, equity securities issued by unconsolidated subsidiaries and affiliated companies, or
available-for-sale securities declines significantly, such securities are restated at fair market value and the difference between fair market value and
the carrying amount is recognized as a loss in the consolidated statement of income in the period of the decline. For equity securities without fair
market value, if the net asset value of the investee declines significantly, such securities are restated to net asset value with the corresponding losses
recognized in the consolidated statement of income in the period of decline. In these cases, such fair market value or the net asset value will be the
carrying amount of the securities at the beginning of the following fiscal year.
(6) INVENTORIES
Merchandise, finished goods and semi-finished goods are mainly stated at the lower of cost determined by the periodic average method and net
realizable value. Raw materials, containers and supplies are mainly stated at the lower of cost determined by the moving-average method and net
realizable value. Cost of uncompleted construction contracts is stated at cost determined by the specific identification method.
Effective from the year ended December 31, 2009, the Company adopted “Accounting Standard for Measurement of Inventories” (ASBJ Statement
No. 9 July 5, 2006). As a result, operating income, ordinary income and income before income taxes and minority interests decreased by ¥1,715
million, ¥208 million and ¥1,150 million, respectively.
(7) ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company and its consolidated subsidiaries provide allowance for doubtful accounts in an amount sufficient to cover probable losses on
collection. The allowance for doubtful accounts consists of the estimated uncollectible amount with respect to certain identified doubtful
receivables and an amount calculated using the actual historic percentage of collection losses.
(8) PROPERTY, PLANT AND EQUIPMENT (excluding leased assets)
Property, plant and equipment are stated at cost net of accumulated depreciation and accumulated loss from impairment. Depreciation for the
Company and its consolidated domestic subsidiaries is calculated using the declining-balance method except for buildings (excluding building
fixtures) acquired on or after April 1, 1998, which are depreciated using the straight-line method. Depreciation for several consolidated subsidiaries
is calculated using the straight-line method.
In connection with the reorganization of plants at consolidated subsidiaries, the Company reviewed and modified the useful lives of fixed assets and
recognized the adjustment to depreciation under “Non-recurring depreciation of fixed assets” in the consolidated statement of income for the year
ended December 31, 2009.
(9) INTANGIBLE ASSETS (excluding leased assets)
The Company and its consolidated domestic subsidiaries amortize intangible assets using the straight-line method. Consolidated overseas
subsidiaries mainly adopt the straight-line method over 20 years.
(10) ALLOWANCE FOR EMPLOYEES’ BONUSES
The Company and its consolidated subsidiaries provide allowance for employees’ bonuses based on the estimated amounts payable.
(11) ALLOWANCE FOR BONUSES FOR DIRECTORS AND CORPORATE AUDITORS
The Company and its consolidated subsidiaries provide allowance for bonuses for directors and corporate auditors based on the estimated amounts
payable.
(12) RESERVE FOR LOSS ON LIQUIDATION OF BUSINESS
The Company provides reserve for loss on business liquidation of subsidiaries and affiliates based on the estimated amounts of possible loss. For
the year ended December 31, 2009, expenses of loss on liquidation of business amounting to ¥2,628 million is reserved for liquidation or
downsizing of Agribio business.
12
(13) RESERVE FOR REPAIRS AND MAINTENANCE
The consolidated subsidiaries of Kyowa Hakko Kirin Co., Ltd. provided reserve for periodic repairs and maintenance of production facilities based
on the estimated amounts payable as of December 31, 2010.
(14) EMPLOYEES’ PENSION AND RETIREMENT BENEFITS
The Company and its consolidated subsidiaries provide allowance for employees’ pension and retirement benefits at the balance sheet date based on
the estimated amounts of projected benefit obligation and the fair value of the plan assets at the end of the fiscal year. Prior service cost is amortized
by the straight-line method over mainly 5 to 15 years. Actuarial differences are amortized by the straight-line method over the average estimated
remaining service period, which is mainly 10 to 15 years, beginning from the following fiscal year.
(Changes in accounting policies)
Effective from the year ended December 31, 2010, the Company has applied the “Partial Amendments to Accounting Standard for Retirement
Benefits (Part 3)” (ASBJ Statement No. 19 of July 31, 2008). As a result, there was no effect on operating income, ordinary income and income
before income taxes and minority interests for the year ended December 31, 2010. There was also no effect on unamortized actuarial differences
caused by application of this amended Accounting Standards as of December 31, 2010.
(15) RETIREMENT BENEFITS FOR DIRECTORS AND CORPORATE AUDITORS
Provision for retirement benefits for directors and corporate auditors represents the full accrued amount of such retirement benefit obligations as of
the balance sheet date calculated in accordance with the policies of the Company and its consolidated subsidiaries.
(16) RESERVE FOR REPAIRS AND MAINTENANCE OF VENDING MACHINES
Kirin Beverage Co., Ltd. and its consolidated subsidiaries provide reserve for repairs and maintenance of vending machines by estimating the
necessary repair and maintenance costs in the future and allocating the costs over a five-year period. The actual expenditure is deducted from the
balance of the reserve on the consolidated balance sheets.
(17) RESERVE FOR LOSS ON REPURCHASE OF LAND
For the year ended December 31, 2009, the Company provides the reserve at an amount deemed necessary to cover the possible loss related to
purchase of land, which was sold to the Organization for Promoting Urban Development (the “Organization”) in September 1998 and the estimated
loss for land improvement and other.
(18) RESERVE FOR ENVIRONMENTAL MEASURES
The Company and its consolidated subsidiaries provide reserve for environmental measures based on the estimated amounts payable.
(Additional information)
Since the estimated amount payable for environmental measures became significant, the Company recorded reserve for environmental measures
effective from the year ended December 31, 2010. Accordingly, the Company recorded a reserve of ¥1,172 million as of December 31, 2010 and
the corresponding expense was recorded in “Other” in special expenses for the year ended December 31, 2010, which resulted in a decrease in
income before income taxes and minority interests by the same amount.
(19) RESERVE FOR LOSS ON LITIGATION
Consolidated subsidiaries of the Company in Brazil provide reserve for estimated losses to be incerred on tax litigation and other matters.
(20) RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the improvement of existing products or the development of new products, including basic research and
fundamental development costs, are recognized in the consolidated statements of income in the year when incurred. The total amount of research
and development expenses, included in cost of sales and selling, general and administrative expenses, was ¥58,297 million ($749,897 thousand),
¥55,660 million and ¥58,534 million, for the years ended December 31, 2011, 2010 and 2009, respectively.
(21) LIQUOR TAXES
The amounts of liquor taxes stated in the consolidated statements of income represent the liquor taxes on the sale of liquor products.
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(22) INCOME TAXES
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
(23) CONSUMPTION TAXES
Consumption taxes are excluded from the revenue and expense accounts which are subject to such taxes.
(24) LEASES
Effective from the year ended December 31, 2009, the Company has applied the “Accounting Standard for Lease Transactions” (ASBJ Statement
No. 13 of June 17, 1993 (First Committee of the Business Accounting Council); revised on March 30, 2007) and the “Guidance on Accounting
Standard for Lease Transactions” (ASBJ Guidance No. 16 of January 18, 1994 (Japanese Institute of Certified Public Accountants, Committee on
Accounting Systems); revised on March 30, 2007), and accordingly such transactions are now based on capital lease method. Depreciation of leased
assets is calculated by the straight-line method over the lease terms without residual value. For finance lease transactions other than those involving
a transfer of title that began prior to the application of the new accounting standards, the previous operating lease method will continue to be
applied.
(25) DERIVATIVE AND HEDGE ACCOUNTING
Derivative financial instruments are stated at fair value and changes in the fair value are recognized as gains and losses in the consolidated
statement of income unless derivative financial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges and meet certain hedging criteria, the Company and its consolidated subsidiaries defer
recognition of gains and losses resulting from changes in fair value of derivative financial instruments as “Deferred gains or losses on hedges” in
accumulated other comprehensive income in the accompanying consolidated balance sheets until the related gains and losses on the hedged items
are recognized.
If forward foreign exchange contracts are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items
are accounted for in the following manner:
1. If a forward foreign exchange contract is executed to hedge an existing foreign currency receivable or payable,
(a) the difference, if any, between the amount in Japanese yen of the hedged foreign currency receivable or payable translated using the spot rate
at the inception date of the contract and the book value of the receivable or payable is recognized in the consolidated statements of income in the
period which includes the inception date, and
(b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the
contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.
(“appropriation treatment”)
2. If a forward foreign exchange contract is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be
recorded using the contracted forward rate on recognition, and no gains or losses on the forward foreign exchange contract are recognized.
(“deferral hedge accounting”)
If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under the interest rate swap
contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed. (“special treatment”)
Interest rate swaps that hedge transactions between consolidated companies are stated at fair value and the changes in the fair value are recognized
as income or loss in the consolidated statement of income for the period.
Hedging instruments and hedged items
The following summarizes hedging derivative financial instruments used by the Company and its consolidated subsidiaries and the items hedged:
Hedging instruments Hedged items
Forward foreign exchange contracts, Receivables and payables in foreign currency,
currency swap contracts, and others future transactions in foreign currency
Interest rate swap contracts, and others Interest on loans receivable and payable
Commodity swap contracts, and others Commodity prices
The Company and its consolidated subsidiaries use derivative financial instruments mainly for the purpose of mitigating (i) fluctuation risk of
foreign currency exchange rates with respect to receivables and payables in foreign currency and future transactions in foreign currency, (ii)
fluctuation risk of interest rates with respect to loans receivable and payable, and (iii) fluctuation risk of commodity prices of raw materials and
others.
14
The Company and its consolidated subsidiaries evaluate hedging effectiveness semi-annually by comparing the cumulative changes in cash flows
from, or the changes in fair value of, hedged items with the corresponding changes in the hedging derivative instruments.
(26) NEW ACCOUNTING STANDARDS
(a) Accounting standard for presentation of comprehensive income
Effective from the year ended December 31, 2011, the Company has applied the “Accounting Standard for Presentation of Comprehensive Income”
(ASBJ Statement No. 25 of June 30, 2010). Accordingly, “Accumulated Other Comprehensive Income” is presented in the consolidated balance
sheets and the consolidated statements of changes in net assets. Information with respect to other comprehensive income for the year ended
December 31, 2010 is disclosed in Note 15. The amounts of “Accumulated Other Comprehensive Income” and “Total Accumulated Other
Comprehensive Income” as of December 31, 2010 include the amounts of “Valuation and Translation Adjustments” and “Total Valuation and
Translation Adjustments,” respectively.
(b) Accounting standard for consolidated financial statements
Effective from the year ended December 31, 2011, the Company has applied the “Cabinet Office Ordinance Partially Revising the Rules on
Financial Statement Terminology, Forms and Preparation Method, etc.” (Cabinet Office Ordinance No. 5 of March 24, 2009) based on the
“Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22 of December 26, 2008). As a result, “Income before
minority interests” is presented on the consolidated financial statements for the year ended December 31, 2011, 2010 and 2009.
(c) Accounting standards for assets retirement obligations
Effective from the year ended December 31, 2011, the Company has applied the “Accounting Standard for Asset Retirement Obligations” (ASBJ
Statement No. 18 of March 31, 2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21 of
March 31, 2008). As a result, operating income, ordinary income and income before income taxes and minority interests decreased by ¥166 million
($2,135 thousand), ¥147 million ($1,890 thousand) and ¥1,628 million ($20,941 thousand), respectively.
(d) Accounting standards for business combinations
Effective from the year ended December 31, 2010, the Company has applied the “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21 of December 26, 2008), the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22 of December
26, 2008), the “Partial Amendments to Accounting Standard for Research and Development Costs” (ASBJ Statement No. 23 of December 26,
2008), the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7 of December 26, 2008), the “Accounting Standard for Equity
Method of Accounting for Investments” (ASBJ Statement No. 16 of December 26, 2008) and the “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10 of December 26, 2008).
(e) Accounting standards for disclosures about fair value of investment and rental property
Effective from the year ended December 31, 2010, the Company has applied the “Accounting Standard for Disclosures about Fair Value of
Investment and Rental Property” (ASBJ Statement No. 20 of November 28, 2008) and the “Guidance on Accounting Standard for Disclosures
about Fair Value of Investment and Rental Property” (ASBJ Guidance No. 23 of November 28, 2008). Since the aggregate value of the Company’s
investment and rental property is immaterial, the Company omitted the disclosure for the years ended December 31, 2011 and 2010.
(f) Accounting standards for construction contracts
Effective from the year ended December 31, 2010, the Company has applied the “Accounting Standard for Construction Contracts” (ASBJ
Statement No. 15 of December 27, 2007) and the “Guidance on Accounting Standard for Construction Contracts” (ASBJ Guidance No. 18 of
December 27, 2007). For construction contracts started from the fiscal year ended December 31, 2010, the percentage-of-completion method (the
cost proportion method is used to estimate the percentage of completion) is applied to the contracts if the outcome of construction activity is
deemed to be reasonably certain, while the completed-contract method is applied otherwise. The effect on net income for the fiscal year ended
December 31, 2010 of this change was immaterial.
(g) Practical solution on unification of accounting policies applied to foreign subsidiaries for consolidated financial statements
Effective from the year ended December 31, 2009, the Company has applied the “Practical Solution on Unification of Accounting Policies Applied
to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ Practical Issues Task Force (PITF) No. 18 of May 17, 2006), and made the
necessary adjustments to the consolidated financial statements. As a result, beginning retained earnings decreased by ¥6,355 million for the year
ended December 31, 2009 due to the amortization of goodwill at overseas subsidiaries. The effect on net income of this change is immmateral.
(27) RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current year presentation.
As described innote 2(26)(b), the consolidated income statement for the year ended December 31, 2010 and 2009 has been modified to conform
with the new presentation rules for the year ended December 31,2011.
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3. SHORT-TERM LOANS PAYABLE, COMMERCIAL PAPERS, LONG-TERM DEBT, BONDS AND OTHER
LONG-TERM LIABILITIES
Short-term loans payable outstanding at December 31, 2011 and 2010 consisted of the following:
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Unsecured ¥35,195 ¥133,814 $452,727
Secured 8,070 100 103,807
Total short-term loans payable ¥43,266 ¥133,914 $556,547
Average annual interest rates on outstanding short-term loans payable as of December 31, 2011 and 2010 were 2.92% and 1.10%, respectively.
Long-term debt and bonds at December 31, 2011 and 2010 consisted of the following:
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Loans principally from banks and insurance companies, maturing from 2013
to 2025 with average annual interest rates of 2.17% for current portion and ¥511,250 ¥310,592 $6,576,408
2.35% for non-current portion
0.553% coupon debentures in yen, due in 2012 20,000 20,000 257,267
1.09% coupon debentures in yen, due in 2013 79,994 79,989 1,028,994
0.856% coupon debentures in yen, due in 2014 30,000 30,000 385,901
1.27% coupon debentures in yen, due in 2015 29,994 29,992 385,824
0.505% coupon debentures in yen, due in 2016 30,000 - 385,901
1.69% coupon debentures in yen, due in 2018 69,991 69,989 900,321
1.639% coupon debentures in yen, due in 2019 50,000 50,000 643,169
1.86% coupon debentures in yen, due in 2020 19,989 19,987 257,126
1.239% coupon debentures in yen, due in 2021 40,000 - 514,535
8.65% U.S. dollar private placement bonds issued by foreign subsidiaries,
3,111 6,723 40,018
due in 2012
4.53% U.S. dollar private placement bonds issued by foreign subsidiaries,
15,518 16,748 199,614
due in 2015
Less current maturities (65,363) (51,233) (840,789)
Total long-term debt and bonds ¥834,486 ¥582,790 $10,734,319
The above balances of loans include secured loans of ¥10,300 million ($132,492 thousand) and ¥82 million as of December 31, 2011 and 2010,
respectively.
Other interest-bearing debt as of December 31, 2011 and 2010 consisted of the following:
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Finance lease obligation - current (at an average interest rate of 3.50% in 2011 ¥1,117 ¥1,232 $14,368
and 3.77% in 2010)
Finance lease obligation - non-current (at an average interest rate of 4.46% in
5,341 5,541 68,703
2011 and 3.89% in 2010, maturing between 2013 to 2028)
Commercial papers (at an average interest rate of 0.13% in 2011 and 0.12% in
121,989 10,999 1,569,192
2010)
Deposits received from customers (at an average interest rate of 1.06% in
¥73,222 ¥73,663 $941,883
2011 and 1.27% in 2010)
Deposits received on the accompanying consolidated balance sheets include non-interest-bearing deposits.
The above balance of deposits received includes a secured portion of ¥3,429 million ($44,108 thousand) and ¥3,430 million as of December 31,
2011 and 2010, respectively.
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The aggregate annual maturities of long-term debt, bonds and finance lease obligation at December 31, 2011 were as follows:
Amount
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Year ending December 31,
2012 ¥66,480 $855,158
2013 103,425 1,330,396
2014 139,063 1,788,821
2015 and thereafter 597,339 7,683,804
Total ¥906,308 $11,658,193
Deposits received are not included in the above schedule of annual maturities, as there is no fixed maturity period for these deposits.
As of December 31, 2011 and 2010, assets pledged as collateral for the above secured liabilities were as follows:
December 31, December 31,
2011 2010 2011
(Millions of yen) (Thousands of
U.S. dollars)
(Note 1)
Cash ¥9 ¥9 $115
Notes and accounts receivable, trade - 29 -
Property, plant and equipment 19,662 2,375 252,919
Other 101 1,152 1,299
Total ¥19,772 ¥3,566 $254,334
Deposits received relating to construction were recognized at the discounted present value of ¥10,377 million ($133,483 thousand) and ¥10,174
million as of December 31, 2011 and 2010, respectively, in accordance with the accounting standard for financial instruments.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost net of accumulated depreciation and accumulated loss from impairment in the consolidated balance
sheets, and are summarized as follows:
December 31, December 31,
2011 2010 2011
(Millions of yen) (Thousands of
U.S. dollars)
(Note 1)
Buildings and structures ¥609,927 ¥602,882 $7,845,729
Machinery, equipment and vehicles 853,220 860,746 10,975,302
Land 201,436 225,246 2,591,149
Construction in progress 47,529 61,103 611,384
Other 177,019 179,917 2,277,064
Total 1,889,134 1,929,896 24,300,668
Accumulated depreciation (1,125,301) (1,190,661) (14,475,186)
Net of property, plant and equipment ¥763,833 ¥739,235 $9,825,482
5. CONTINGENT LIABILITIES
As of December 31, 2011 and 2010, the Company and its consolidated subsidiaries were contingently liable as guarantors of loan obligations of
unconsolidated subsidiaries, affiliates, employees and others for the amount of ¥6,240 million ($80,267 thousand) and ¥7,820 million, respectively.
The Company and its consolidated subsidiaries were also contingently liable for notes and accounts receivables transferred through securitization
for the amount of ¥1,135 million as of December 31, 2010.
The Company and its consolidated subsidiaries were also contingently liable for notes receivable discounted for the amount of ¥83 million ($1,067
thousand) and ¥30 million as of December 31, 2011 and 2010, respectively.
Consolidated subsidiaries of the Company in Brazil are in tax-related litigation with the tax authority over ICMS (State Value-Added Tax), PIS
(Social Integration Program), COFINS (Social Security Contribution) and others, in addition to labor-related litigation and civil lawsuits. Although
“Reserve for loss on litigation” has been recorded in order to provide for the estimated losses on these litigation and lawsuits, BRL 2,042,443
thousand (¥84,659 million) associated with tax-related litigation, BRL 155,637 thousand (¥6,451 million) associated with labor-related litigation
and BRL 204,375 thousand (¥8,471 million) associated with civil lawsuits have not been recorded as reserves as of December 31, 2011, because the
risks of losses in the future are classified by the management as possible upon consideration of the individual risks of each contingent event based
on the opinion of outside legal advisers.
17
6. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major elements of selling, general and administrative expenses for the years ended December 31, 2011, 2010 and 2009 were as follows:
Year ended
Year ended December 31, December 31,
2011 2010 2009 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Sales promotion ¥151,176 ¥157,040 ¥192,714 $1,944,635
Freight 72,071 70,857 80,010 927,077
Advertising 59,074 64,307 68,231 759,891
Employees’ pension and retirement benefit expenses 14,440 14,941 15,912 185,747
Salaries and wages of employees 137,472 133,033 141,921 1,768,356
Research and development expenses 58,238 55,468 57,843 749,138
Depreciation ¥31,893 ¥31,274 ¥30,900 $410,252
7. LOSS ON IMPAIRMENT
Year ended December 31, 2011
The Company and its consolidated subsidiaries classified fixed assets into groups based on the respective type of business, which are the units for
making investment decisions. However, certain goodwill of foreign subsidiaries including Australian subsidiaries was classified into groups of
units which represent the lowest level at which the goodwill is monitored for internal management purposes.
Use Location Type of assets
Assets used for business Buildings and structures, machinery,
Itabashi-ku, Tokyo and 3
(Domestic Alcohol Beverages equipment and vehicles, land, intangible
others
business) assets and other
Assets used for business Buildings and structures, machinery,
(Overseas Alcohol Beverages and Australia and China equipment and vehicles, land, intangible
Soft Drinks business) assets and other assets
Assets for rent Chofu-shi, Tokyo Buildings and structures
Buildings and structures, machinery,
Takatsuki-shi, Osaka and
Idle properties equipment and vehicles, land and other
11 others
assets
For idle properties, each property is considered to constitute a group. Headquarters and welfare facilities are classified as corporate assets because
they do not generate cash flows independent of other assets or group of assets.
Carrying amounts of certain assets were devalued to their memorandum value or recoverable amount because (i) It was clearly determined that
some assets used for Domestic Alcohol Beverages business would not be used in the future and others, (ii) The Company revalued assets recorded
at Overseas Alcohol Beverage and Soft Drink businesses at subsidiaries in Australia and China, and (iii) The fair market values of rental properties
and idle properties substantially declined compared to their carrying values.
As a result, the Company recognized a loss on impairment for such devaluation of ¥16,895 million ($217,326 thousand) recorded under special
expenses, comprising ¥1,663 million ($21,391 thousand) for buildings and structures, ¥2,775 million ($35,695 thousand) for machinery, equipment
and vehicles, ¥7,104 million ($91,381 thousand) for land, ¥505 million ($6,496 thousand) for other property, plant and equipment, and ¥4,846
million ($62,335 thousand) for other intangible assets.
The recoverable amount of each group of assets is the higher of net selling price (fair value less cost to sell or appraised value) or value in use
calculated by discounting future cash flows at a discount rate of 5.0 % for the Company and domestic consolidated subsidiaries. Discount rates of
10.5% to 13.5% were used for the calculation of value in use of assets recorded at overseas consolidated subsidiaries depending on the situation of
each subsidiary.
18
Year ended December 31, 2010
The Company and its consolidated subsidiaries classified fixed assets into groups by the respective type of business (Alcohol Beverages, Soft
Drinks and Foods, Pharmaceuticals, and Other), which are the units for making investment decisions.
Use Location Type of assets
Others (Soft Drinks and Foods Australia Goodwill, intangible assets and other
business) assets
Assets used for business (Alcohol Yatsushiro-shi, Buildings and structures, machinery,
Beverages business) Kumamoto and 2 others equipment and vehicles and other assets
Assets used for business and
assets for rent (Soft Drinks and Sayama-shi, Saitama Buildings and structures and land
Foods business)
Buildings and structures, machinery,
Assets for rent Osaka-shi, Osaka equipment and vehicles, land and other
assets
Buildings and structures, machinery,
Takaoka-shi, Toyama and
Idle properties equipment and vehicles, land and other
9 others
assets
Fixed assets in the real estate business included in Others and the restaurant business and idle properties along with individual properties or stores
are considered to constitute a group. Headquarters and welfare facilities are classified as corporate assets because they do not generate cash flows
independent of other assets or group of assets.
Carrying amounts of certain assets were devalued to their memorandum value or recoverable amount because (i) The Company revalued goodwill,
intangible assets and others recorded at Soft Drink and Food business at subsidiaries in Australia in accordance with International Financial
Reporting Standards by reflecting recent increase in material prices, changes in market environment and the volatility of brand value caused by such
changes, (ii) Some assets used for Alcohol Beverages business were not recoverable based on estimated future cash flows, (iii) Some of business
assets and rental properties used for Soft Drinks and Foods business were revalued following the reorganization of refrigerated drinks
manufacturing operations, and (iv) The fair market values of rental properties and idle properties substantially declined compared to their carrying
values.
As a result, the Company recognized a loss on impairment for such devaluation, recorded under special expenses, comprising ¥1,422 million for
buildings and structures, ¥1,224 million for machinery, equipment and vehicles, ¥1,384 million for land, ¥29 million for other property, plant and
equipment, ¥13,938 million for goodwill, and ¥24,885 million for other intangible assets.
The recoverable amount of each group of assets is the higher of net selling price (fair value less cost to sell or appraised value) or value in use
calculated by discounting future cash flows at a discount rate of 5.0 % for the Company and domestic consolidated subsidiaries. Discount rate of
12.9% (post tax 9.0%) was used for the calculation of value in use of goodwill and other assets recorded at the Soft Drink and Food business in
Australia.
Year ended December 31, 2009
The Company and its consolidated subsidiaries classified fixed assets into groups by the respective type of business (Alcohol Beverages, Soft
Drinks and Foods, Pharmaceuticals, and Other), which are the units making investment decisions.
Use Location Type of assets
Shioya-gun, Tochigi and 7 Buildings and structures, machinery,
Assets used for business (Alcohol
others equipment and vehicles, land and other
Beverages business)
assets
Assets used for business (Soft South Australia, Buildings and structures, machinery,
Drinks and Foods business) Australia and 2 others equipment and vehicles, and tools
Assets for rent Taisho-ku, Osaka Buildings and structures, and land
Buildings and structures, machinery,
Itabashi-ku, Tokyo and 3
Idle properties equipment and vehicles, land and other
others
assets
Fixed assets in the real estate business included in Others, the restaurant business and idle properties along with individual properties or stores are
considered to constitute a group. Headquarters and welfare facilities are classified as corporate assets because they do not generate cash flows
independent of other assets or group of assets.
Carrying amounts of certain assets were devalued to their memorandum value or recoverable amount because (i) It became clear that Tochigi and
Hokuriku plants of Kirin Brewery Company, Limited in Alcohol Beverages business would no longer be utilized as a result of reorganization and
Kirin Hiroshima Brewery would no longer be utilized as a result of its planned closure, (ii) Some assets used for Soft Drinks and Foods business are
being reorganized as production equipment, (iii) carrying amounts of rental properties were not recoverable based on estimated future cash flows,
and (iv) carrying amounts of idle properties were devalued to their recoverable amounts, owing to substantial decline in their fair market value.
19
During the fiscal year ended December 31, 2009, the Company and its consolidated subsidiaries recognized loss on impairment on the following
groups of assets;
As a result, the Company recognized a loss on impairment, recorded under special expenses, comprising ¥13,319 million for buildings and
structures, ¥9,351 million for machinery, equipment and vehicles, ¥7,534 million for land, ¥144 million for other property, plant and equipment,
¥379 million for other intangible assets, and ¥7,815 million for removal costs.
The recoverable amount of each group of assets is the higher of net selling price (fair value less cost to sell or appraised value) or value in use
calculated by discounting future cash flows at a discount rate of 5.0 % for the Company and domestic consolidated subsidiaries.
For Kirin Brewery Company, Limited, value in use of the depreciable assets related to the plant reorganization is calculated by the depreciation
expense equivalents until the cessation of manufacturing.
Due to a decline in premium brand profitability at consolidated subsidiaries in Australia, loss on impairment of other intangible assets, in the
amount of ¥299 million, was recognized.
8. FOREIGN CURRENCY TRANSLATION GAIN OR LOSS
For the year ended December 31, 2011, loss on currency swaps that are carried to hedge the foreign exchange rate fluctuation risks for loans
receivable in foreign currencies amounting to ¥851 million ($10,946 thousand) is included in “Other” under non-operating expenses after offsetting
foreign currency translation gains.
For the year ended December 31, 2010, gain on currency swaps and forward foreign exchange contracts that are carried to hedge the foreign
exchange rate fluctuation risks for loans receivable in foreign currencies amounting to ¥3,932 million is presented after offsetting foreign currency
translation loss.
For the year ended December 31, 2009, loss on currency swaps and forward foreign exchange contracts that are carried to hedge the foreign
exchange rate fluctuation risks for loans receivable in foreign currencies amounting to ¥16,597 million is presented after offsetting foreign currency
translation gain.
9. REVERSAL OF REMOVAL COSTS
In connection with reorganizing of factories at domestic consolidated subsidiaries, removal costs of assets were recorded for the year ended
December 31, 2009. Since the actual removal cost was lower than initially estimated, the Company reversed the difference in special income in the
consolidated statement of income for the year ended December 31, 2010.
10. LOSS ON REVISION OF RETIREMENT BENEFIT PLAN
For the year ended December 31, 2010, loss on revision of retirement benefit plan was recognized mainly due to the partial abolishment of the
lump-sum severance payment plan of the Company and its consolidated subsidiaries.
11. LOSS ON PRIOR PERIOD ADJUSTMENTS
During the year ended December 31, 2010, it was revealed that fraudulent actions, such as intentional failure to record the cost of shipment of
sample products, inappropriate accounting of manipulation of sales recording periods and others, and lost of sales, fictitious manufacturing, and
circular transactions combining these transactions, had been carried out from prior years by the Fish Feedstuffs Division of Mercian Corporation, a
consolidated subsidiary of the Company. It was also revealed that in order to conceal these fraudulent actions, falsification of tracking records in
internal control records and manipulation of stock quantities by imitations had been carried out.
Based on the results of an investigation conducted by an internal investigation committee of Mercian Corporation, the amounts recorded for trade
accounts receivable, inventories, sales and cost of sales were revised. Due to this revision for the year ended December 31, 2010, the Company
recognized ¥5,300 million loss for prior years as a loss on prior period adjustments in special expenses, and income taxes for prior years-deferred
amounted to ¥1,169 million as reversal of deferred tax assets in prior years. The losses incurred during the fiscal year ended December 31, 2010,
have been recorded in the respective account items.
12. LOSS RELATED TO THE GREAT EAST JAPAN EARTHQUAKE
Loss related to the Great East Japan Earthquake for the year ended December 31, 2011 includes repair costs for damaged facilities, loss on
devaluation and disposal of damaged inventories, fixed costs for manufacturing during suspension of operations, and costs related to unpublished
advertisements.
20
13. BUSINESS RESTRUCTURING EXPENSE
For the years ended December 31, 2011 and 2010, business restructuring expense comprised expense for plant reorganization of ¥4,222 million
($54,309 thousand) and ¥5,337 million, respectively, at consolidated subsidiaries.
For the year ended December 31, 2009, business restructuring expense comprised additional retirement benefits amounting to ¥1,363 million
resulting from early retirement at consolidated subsidiaries.
14. EXPENSES FOR INTEGRATION
For the year ended December 31, 2009, temporary expenses resulting from strategic integration in the Group are included in “Expenses for
integration.”
15. COMPREHENSIVE INCOME
Other comprehensive income for the year ended December 31, 2010 was as follows:
(Millions of yen)
Net unrealized gains on securities ¥(12,391)
Deferred gains or losses on hedges 2,799
Foreign currency translation adjustments (6,464)
Share of other comprehensive income of associates accounted for by the
(4,537)
equity method
Total ¥(20,594)
Comprehensive income for the year ended December 31, 2010 was as follows:
(Millions of yen)
Comprehensive income attributable to:
Owners of the parent ¥(5,766)
Minority interests 7,675
Total ¥1,908
16. INFORMATION ON SECURITIES
The following tables summarize acquisition costs, book value and fair value of securities with fair market value.
(a) Held-to-maturity debt securities with fair market value
December 31, 2011
Fair market Fair market
Book value Difference Book value Difference
value value
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
1. Securities with fair market value
exceeding book value
Governmental/municipal bonds ¥310 ¥312 ¥2 $3,987 $4,013 $25
Corporate bonds - - - - - -
Other - - - - - -
Sub-total 310 312 2 3,987 4,013 25
2. Securities with fair market value
not exceeding book value
Governmental/municipal bonds - - - - - -
Corporate bonds - - - - - -
Other - - - - - -
Sub-total - - - - - -
Total ¥310 ¥312 ¥2 $3,987 $4,013 $25
21
December 31, 2010
Book value Fair market value Difference
(Millions of yen)
1. Securities with fair market value
exceeding book value
Governmental/municipal bonds ¥510 ¥516 ¥6
Corporate bonds - - -
Other - - -
Sub-total 510 516 6
2. Securities with fair market value
not exceeding book value
Governmental/municipal bonds - - -
Corporate bonds - - -
Other - - -
Sub-total - - -
Total ¥510 ¥516 ¥6
(b) Available-for-sale securities with fair market value
December 31, 2011
Acquisition Acquisition
Book value Difference Book value Difference
cost cost
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
1. Securities with book value exceeding
acquisition cost
Equity securities ¥66,530 ¥40,610 ¥25,920 $855,801 $522,382 $333,419
Bonds
Governmental/municipal bonds - - - - - -
Corporate bonds - - - - - -
Other 5,064 4,909 155 65,140 63,146 1,993
Other 1,087 934 153 13,982 12,014 1,968
Sub-total 72,682 46,453 26,228 934,936 597,543 337,381
2. Securities with book value not exceeding
acquisition cost
Equity securities 40,550 49,563 (9,013) 521,610 637,548 (115,937)
Bonds
Governmental/municipal bonds - - - - - -
Corporate bonds - - - - - -
Other 14 15 (0) 180 192 (11)
Other - - - - - -
Sub-total 40,565 49,579 (9,014) 521,803 637,754 (115,950)
Total ¥113,247 ¥96,033 ¥17,214 $1,456,740 $1,235,310 $221,430
December 31, 2010
Book value Acquisition cost Difference
(Millions of yen)
1. Securities with book value exceeding acquisition cost
Equity securities ¥89,100 ¥50,208 ¥38,892
Bonds
Governmental/municipal bonds - - -
Corporate bonds - - -
Other 348 346 2
Other - - -
Sub-total 89,449 50,554 38,895
2. Securities with book value not exceeding acquisition cost
Equity securities 136,272 162,210 (25,938)
Bonds
Governmental/municipal bonds - - -
Corporate bonds - - -
Other - - -
Other - - -
Sub-total 136,272 162,210 (25,938)
Total ¥225,721 ¥212,764 ¥12,956
22
(c) Total sale of available-for-sale securities
Year ended December 31, Year ended December 31,
2011 2010 2011
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Amount of securities sold ¥7,875 ¥32,962 $101,299
Total gain on sale 1,619 14,716 20,825
Total loss on sale ¥692 ¥132 $8,901
(d) Book value of major securities not measured at fair market value
December 31, December 31,
2011 2010 2011
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Available-for-sale securities
Unlisted equity securities ¥19,709 ¥24,502 $253,923
Other 31 33 -
Total ¥19,740 ¥24,536 $253,923
(e) Reclassification of holding purpose of investment securities
The holding purpose of shares of Fraser and Neave Limited that were held as available-for-sale securities was changed to equity securities issued
by affiliates since the Company acquired additional shares during the fiscal year ended December 31, 2011 and therefore it was accounted for by
the equity method. As a result, net unrealized gains on securities increased by ¥2,161 million ($27,797 thousand) as a result of this
reclassification.
(f) Impairment loss on investment securities
Impairment losses of ¥24,119 million ($310,252 thousand), ¥1,612 million and ¥8,363 million were recognized in the consolidated statements of
income as “Loss on devaluation of investment securities”, for available-for-sale securities for the years ended December 31, 2011, 2010 and
2009, respectively. Where the fair market value of available-for-sale securities has declined by more than 30% from their acquisition costs, the
value of those securities is considered to have “substantially declined” and the impairment losses on those securities are recognized in the
consolidated statements of income, unless the value is considered recoverable. For available-for-sale securities without fair market value, when
the value of those securities has declined by more than 50% from their acquisition costs, the value of those securities is considered to have
“substantially declined” and the impairment losses on those securities are recognized in the consolidated statements of income, except for cases
where the recoverability of the value of those securities in the future is supported by reasonable grounds.
17. SEGMENT INFORMATION
For the year ended December 31, 2011
Effective from the year ended December 31, 2011, the Company has applied the “Accounting Standard for Disclosures about Segments of
an Enterprise and Related Information” (ASBJ Statement No. 17 of March 27, 2009) and the “Guidance on Accounting Standard for
Disclosures about Segments of an Enterprise and Related Information” (ASBJ Guidance No. 20 of March 21, 2008).
1. Summary of reportable segments
The reportable segments of the Kirin Group are constituent units of the Group whose separate financial information is readily available and
which are periodically examined by the Board of Directors for the purpose of deciding the allocation of management resources and
evaluating the business results.
The Kirin Group comprises, under a holding company structure, various business companies including Kirin Brewery Company, Limited
engaging in the Domestic Alcohol Beverages business, Kirin Beverage Company, Limited engaging in the Domestic Non-alcohol
Beverages business, LION PTY LTD engaging in the Overseas Beverages business, and Kyowa Hakko Kirin Co., Ltd. engaging in the
Pharmaceuticals and Biochemicals business. Each of these business companies work out a comprehensive strategy applicable to their
products and services and carries out their business activities.
Consequently, the Kirin Group has identified four reportable segments, namely, Domestic Alcohol Beverages, Domestic Non-alcohol
Beverages, Overseas Beverages, and Pharmaceuticals and Biochemicals, by combining the business companies with the emphasis on the
business company units and in consideration of the similarity of their economic characteristics.
“Domestic Alcohol Beverages” conducts domestic production and sale of alcohol beverages, such as beer, sparkling malt liquor
(happo-shu), new genre, whiskey, spirits and wine, and includes such businesses as engineering and logistics.
23
“Domestic Non-alcohol Beverages” conducts domestic production and sale of soft drinks.
“Overseas Beverages” conducts overseas production and sale of beer, whiskey, spirits, wine, soft drinks, dairy products and other products.
in overseas.
“Pharmaceuticals and Biochemicals” conducts production and sale of pharmaceutical and biochemical products and other products.
“Domestic Alcohol Beverages” and “Domestic Non-alcohol Beverages” include certain overseas companies.
2. Calculation of sales, income or loss, assets and other item amounts by reportable segment
The accounting method for the business segments that are reported is generally the same as described in Note 2 “SIGNIFICANT
ACCOUNTING POLICIES.”
The segment income figures stated in the reportable segments are based on operating income.
The inter-segment sales or the inter-segment figures are based on actual market prices.
Year ended December 31, 2011
Reportable Segment Amount
Domestic Beverages recorded in
the
Pharmaceuticals Others Adjustment
Domestic Domestic Overseas consolidated
and (Note 1) (Note 2)
Alcohol Non-alcohol Beverages financial
Biochemicals statements
Beverages Beverages
(Note 3)
(Millions of yen)
Sales
Unaffiliated
¥868,233 ¥314,568 ¥454,216 ¥332,843 ¥101,912 ¥- ¥2,071,774
customers
Less liquor taxes 323,129 - - - 246 - 323,375
Net sales 545,104 314,568 454,216 332,843 101,665 - 1,748,398
Inter-segment 36,222 2,865 974 10,879 28,767 (79,710) -
Total sales 581,326 317,434 455,190 343,722 130,433 (79,710) 1,748,398
Segment income 70,580 2,802 15,388 49,447 6,259 (1,613) 142,864
Segment assets 563,296 207,055 1,239,872 639,704 236,584 (32,259) 2,854,254
Other items
Depreciation and
31,995 12,463 26,941 22,833 8,450 1,186 103,871
amortization
Amortization of
223 2,630 26,185 7,659 754 - 37,453
goodwill
Investments in
equity-method 1,397 744 165,107 30,894 88,735 - 286,878
affiliates
Increase of property,
plant and equipment ¥22,785 ¥7,849 ¥20,917 ¥19,528 ¥6,292 ¥695 ¥78,069
and intangible assets
24
Year ended December 31, 2011
Reportable Segment Amount
Domestic Beverages recorded in
the
Pharmaceuticals Others Adjustment
Domestic Domestic Overseas consolidated
and (Note 1) (Note 2)
Alcohol Non-alcohol Beverages financial
Biochemicals statements
Beverages Beverages
(Note 3)
(Thousands of U.S. dollars)
(Note 1)
Sales
Unaffiliated
$11,168,420 $4,046,411 $5,842,757 $4,281,489 $1,310,933 $- $26,650,038
customers
Less liquor taxes 4,156,534 - - - 3,164 - 4,159,698
Net sales 7,011,885 4,046,411 5,842,757 4,281,489 1,307,769 - 22,490,326
Inter-segment 465,937 36,853 12,528 139,940 370,041 (1,025,340) -
Total sales 7,477,823 4,083,277 5,855,286 4,421,430 1,677,810 (1,025,340) 22,490,326
Segment income 907,898 36,043 197,941 636,056 80,511 (20,748) 1,837,715
Segment assets 7,245,896 2,663,429 15,948,958 8,228,762 3,043,272 (414,960) 36,715,384
Other items
Depreciation and
411,564 160,316 346,552 293,709 108,695 15,255 1,336,133
amortization
Amortization of
2,868 33,830 336,827 98,520 9,698 - 481,722
goodwill
Investments in
equity-method 17,970 9,570 2,123,835 397,401 1,141,432 - 3,690,223
affiliates
Increase of property,
plant and equipment
$293,092 $100,964 $269,063 $251,196 $80,936 $8,940 $1,004,232
and intangible
assets
Notes
1. “Others” includes food business, such as seasonings, and others.
2. The adjustments are as follows;
(1) The negative ¥1,613 million ($20,748 thousand) adjustment in segment income includes ¥19,503 million ($250,874 thousand) in
inter-segment eliminations and negative ¥21,117 million ($271,636 thousand) in corporate expenses not attributable to any
reportable segment. The corporate expenses are mainly group administrative expenses due to the Company’s transfer to a pure
holding company and research and development expenses for basic technologies.
(2) The negative ¥32,259 million ($414,960 thousand) adjustment in segment assets includes negative ¥ 307,181 million ($3,951,389
thousand) in inter-segment asset and liability eliminations and ¥ 274,921 million ($3,536,416 thousand) in corporate assets not
attributable to any reportable segment. Corporate assets mainly consist of surplus funds (cash), long-term investments (investment
securities) of the Company, and assets which belong to the administrative department of the Company, a pure holding company.
(3) The ¥1,186 million ($15,255 thousand) adjustment in depreciation and amortization mainly consists of depreciation and
amortization of corporate assets.
(4) The ¥ 695 million ($8,940 thousand) adjustment in increase of property, plant and equipment and intangible assets mainly consists
of the acquisitions of property, plant and equipment and intangible assets that are treated as corporate assets.
3. Segment income is reconciled to operating income in the consolidated statements of income.
25
Year ended December 31, 2010
Reportable Segment Amount
Domestic Beverages recorded in
the
Pharmaceuticals Others Adjustment
Domestic Domestic Overseas consolidated
and (Note 1) (Note 2)
Alcohol Non-alcohol Beverages financial
Biochemicals statements
Beverages Beverages
(Note 3)
(Millions of yen)
Sales
Unaffiliated
¥928,480 ¥347,769 ¥403,977 ¥405,602 ¥91,972 ¥- ¥2,177,802
customers
Less liquor taxes 341,484 - - 888 154 - 342,527
Net sales 586,996 347,769 403,977 404,714 91,818 - 1,835,274
Inter-segment 43,983 5,422 893 8,139 31,907 (90,347) -
Total sales 630,979 353,192 404,870 412,853 123,726 (90,347) 1,835,274
Segment income 73,239 2,453 22,907 48,719 8,104 (3,811) 151,612
Segment assets 603,105 214,940 906,723 664,500 160,850 99,076 2,649,197
Other items
Depreciation and
35,034 14,242 23,720 22,188 8,480 1,593 105,259
amortization
Amortization of
247 2,725 24,295 6,752 611 - 34,632
goodwill
Investments in
equity-method 2,278 751 135,976 31,834 3,981 - 174,821
affiliates
Increase of property,
plant and equipment ¥29,238 ¥9,268 ¥19,238 ¥29,326 ¥7,219 ¥862 ¥95,154
and intangible assets
Notes
1. “Others” includes food business such as seasonings, and others.
2. The adjustments are as follows;
(1) The negative ¥3,811 million adjustment in segment income includes ¥18,183 million in inter-segment eliminations and negative
¥21,995 million in corporate expenses not attributable to any reportable segment. The corporate expenses are mainly group
administrative expenses due to the Company’s transfer to a pure holding company and research and development expenses for
basic technologies.
(2) The ¥99,076 million adjustment in segment assets includes negative ¥364,349 million in inter-segment asset and liability
eliminations and ¥463,426 million in corporate assets not attributable to any reportable segment. Corporate assets mainly consist of
surplus funds (cash), long-term investments (investment securities) of the Company, and assets which belong to the administrative
department of the Company, a pure holding company.
(3) The ¥1,593 million adjustment in depreciation and amortization mainly consists of depreciation and amortization of corporate
assets.
(4) The ¥862 million adjustment in increase of property, plant and equipment and intangible assets mainly consists of the acquisitions
of property, plant and equipment and intangible assets that are treated as corporate assets.
3. Segment income is reconciled to operating income described in the consolidated statements of income.
26
3. Related Information
(1) Information by product and service
Information is omitted since similar information is disclosed in the segment information.
(2) Information by region
(i) Sales
Year ended December 31, 2011
Japan Asia / Oceania Others Total Japan Asia / Oceania Others Total
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
¥1,531,467 ¥461,325 ¥78,980 ¥2,071,774 $19,699,858 $5,934,203 $1,015,950 $26,650,038
Note: Sales are classified by country or area based on customer location.
(ii) Property, Plant and Equipment
December 31, 2011
Japan Asia / Oceania Others Total Japan Asia / Oceania Others Total
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
¥481,116 ¥153,260 ¥129,455 ¥763,833 $6,188,783 $1,971,443 $1,665,230 $9,825,482
(3) Information by major customer
There is no major unaffiliated customer which accounts for 10% or more of the net sales on the consolidated statements of income.
4. Information regarding loss on impairment of fixed assets by reportable segment
Year ended December 31, 2011
Reportable Segment
Domestic Beverages
Pharmaceuticals Others Adjustment Total
Domestic Domestic Overseas
and
Alcohol Non-alcohol Beverages
Biochemicals
Beverages Beverages
(Millions of yen)
Loss on impairment ¥7,084 ¥11 ¥8,888 ¥769 ¥26 ¥115 ¥16,895
Note: “Others” includes food business, such as seasonings, and others.
Year ended December 31, 2011
Reportable Segment
Domestic Beverages
Pharmaceuticals Others Adjustment Total
Domestic Domestic Overseas
and
Alcohol Non-alcohol Beverages
Biochemicals
Beverages Beverages
(Thousands of U.S. dollars)
(Note 1)
Loss on impairment $91,124 $141 $114,329 $9,891 $334 $1,479 $217,326
Note: “Others” includes food business, such as seasonings, and others.
5. Information regarding amortization of goodwill and remaining goodwill balance by reportable segment
December 31, 2011
Reportable Segment
Domestic Beverages
Pharmaceuticals Others Adjustment Total
Domestic Domestic Overseas
and
Alcohol Non-alcohol Beverages
Biochemicals
Beverages Beverages
(Millions of yen)
Balance at the end of
¥1,942 ¥29,979 ¥541,913 ¥129,909 ¥10,004 ¥- ¥713,749
current period
Note: Information on amortization of goodwill is omitted since similar information is disclosed in the segment information.
Note: “Others” includes food business, such as seasonings, and others.
27
December 31, 2011
Reportable Segment
Domestic Beverages
Pharmaceuticals Others Adjustment Total
Domestic Domestic Overseas
and
Alcohol Non-alcohol Beverages
Biochemicals
Beverages Beverages
(Thousands of U.S. dollars)
(Note 1)
Balance at the end of
$24,980 $385,631 $6,970,838 $1,671,070 $128,685 $- $9,181,232
current period
Note: Information on amortization of goodwill is omitted since similar information is disclosed in the segment information.
Note: “Others” includes food business, such as seasonings, and others.
6. Information regarding gain on negative goodwill by reportable segment
Disclosure is omitted since the aggregate value is immaterial.
For the years ended December 31, 2010 and 2009
(a) Business segment information
As of and for the Year ended December 31, 2010
Alcohol Soft Drinks Pharma- Eliminations
Beverages and Foods ceuticals Others Total or Corporate Consolidated
(Millions of yen)
1. Sales and operating income:
Sales
Unaffiliated customers ¥1,097,976 ¥638,122 ¥210,157 ¥231,547 ¥2,177,802 ¥- ¥2,177,802
Less liquor taxes 341,484 - - 1,043 342,527 - 342,527
Net sales 756,491 638,122 210,157 230,503 1,835,274 - 1,835,274
Inter-segment 35,271 6,186 208 36,417 78,083 (78,083) -
Total sales 791,762 644,308 210,365 266,921 1,913,358 (78,083) 1,835,274
Operating expenses 677,701 633,202 171,420 258,222 1,740,546 (56,883) 1,683,662
Operating income ¥114,061 ¥11,105 ¥38,945 ¥8,699 ¥172,811 ¥(21,199) ¥151,612
2. Assets, depreciation, loss on
impairment and capital
expenditures:
Assets ¥1,180,517 ¥596,358 ¥433,151 ¥347,012 ¥2,557,040 ¥92,156 ¥2,649,197
Depreciation and amortization 49,151 24,655 10,730 19,127 103,665 1,594 105,259
Loss on impairment 1,880 39,630 804 570 42,885 - 42,885
Capital expenditures 42,060 15,993 18,979 17,257 94,291 862 95,154
As of and for the Year ended December 31, 2009
Alcohol Soft Drinks Pharma- Eliminations
Beverages and Foods ceuticals Others Total or Corporate Consolidated
(Millions of yen)
1. Sales and operating income:
Sales
Unaffiliated customers ¥1,097,694 ¥735,032 ¥206,760 ¥238,986 ¥2,278,473 ¥- ¥2,278,473
Less liquor taxes 358,517 - - 1,225 359,743 - 359,743
Net sales 739,176 735,032 206,760 237,760 1,918,730 - 1,918,730
Inter-segment 35,639 5,760 622 32,227 74,250 (74,250) -
Total sales 774,815 740,793 207,383 269,988 1,992,981 (74,250) 1,918,730
Operating expenses 672,014 733,693 173,048 266,134 1,844,891 (54,595) 1,790,295
Operating income ¥102,800 ¥7,099 ¥34,334 ¥3,854 ¥148,089 ¥(19,654) ¥128,435
2. Assets, depreciation, loss on
impairment and capital
expenditures:
Assets ¥1,305,175 ¥661,590 ¥421,781 ¥372,036 ¥2,760,582 ¥100,611 ¥2,861,194
Depreciation and amortization 48,441 27,716 10,913 17,036 104,107 1,766 105,874
Loss on impairment 28,265 5,838 4,290 111 38,507 336 38,843
Capital expenditures 51,853 17,816 17,152 18,418 105,239 13,008 118,248
28
Business segments are classified based on the business management framework in consideration of the type and nature of products.
Main products for each business segment are as follows:
Years ended December 31, 2010 and 2009
Business segment Main products
Alcohol beverages Beer, sparkling malt liquor (happo-shu), new genre, whiskey, spirits, wine, engineering, logistics and
others
Soft drinks and Foods Soft drinks, foods, health foods, and functional foods and others
Pharmaceuticals Pharmaceutical products
Others Biochemical, chemical and others
Unallocable operating expenses included in “Eliminations or Corporate” are as follows:
Year ended December 31, 2010 ¥21,995 million, mainly consisting of ¥19,160 million for group administrative expenses due to the
Company’s transfer to a pure holding company and ¥2,834 million for research and development of
basic technologies.
Year ended December 31, 2009 ¥19,441 million, mainly consisting of ¥16,380 million for group administrative expenses due to the
Company’s transfer to a pure holding company and ¥3,060 million for research and development of
basic technologies.
Corporate assets included in “Eliminations or Corporate” mainly consist of surplus funds (cash) and long-term investments (investment securities)
of the Company, and assets which belong to the administrative department of the Company.
Year ended December 31, 2010 ¥463,426 million
Year ended December 31, 2009 ¥484,893 million
As described in Note 2 (1), the fiscal year-ends of Lion Nathan National Foods Pty Ltd (“LNNF”), National Foods Limited (“NFL”) and its
subsidiaries (“the companies”) were changed from December 31 to September 30 from the consolidated year ended December 31, 2010.
To prepare the consolidated financial statements, financial statements of the companies as of September 30, 2010 were used because the difference
between the Company’s and the companies’ year-ends does not exceed three months. However, the profit or loss of the companies for the period
from October 1, 2009 to December 31, 2009 is not included in the Company’s consolidated statement of income for the year ended December 31,
2011 because their profit or loss for that period was included in the Company’s consolidated statement of income for the fiscal year ended
December 31, 2009.
For the three months ended December 31, 2009, sales and operating income of the companies included in the “Soft Drinks and Foods” segment
were ¥72,421 million and ¥4,311 million, respectively.
Changes in classification of business segment
In 2010, LNNF became a company managing all Oceania operations (NFL, LION NATHAN LTD. and their subsidiaries) including the “Alcohol
Beverages” and “Soft Drinks and Foods” businesses on a unified basis. Consequently, the business segment to which LNNF belongs has changed
from the “Soft Drinks and Foods” segment to the “Others” segment from the year ended December 31, 2010. As a result, operating income of the
“Others” segment decreased by ¥4,815 million for the year ended December 31, 2010.
(b) Geographical segment information
As of and for the Year ended December 31, 2010
Asia / Eliminations
Japan Oceania Others Total or Corporate Consolidated
(Millions of yen)
1. Sales and operating income:
Sales
Unaffiliated customers ¥1,724,529 ¥393,297 ¥59,975 ¥2,177,802 ¥- ¥2,177,802
Less liquor taxes 341,414 1,061 51 342,527 - 342,527
Net sales 1,383,114 392,235 59,924 1,835,274 - 1,835,274
Inter-segment 32,121 3,695 8,053 43,870 (43,870) -
Total sales 1,415,236 395,931 67,978 1,879,145 (43,870) 1,835,274
Operating expenses 1,269,343 374,392 61,999 1,705,735 (22,072) 1,683,662
Operating income ¥145,892 ¥21,539 ¥5,978 ¥173,410 ¥(21,798) ¥151,612
2. Assets ¥1,562,732 ¥910,803 ¥85,828 ¥2,559,364 ¥89,832 ¥2,649,197
29
As of and for the Year ended December 31, 2009
Asia / Eliminations
Japan Oceania Others Total or Corporate Consolidated
(Millions of yen)
1. Sales and operating income:
Sales
Unaffiliated customers ¥1,759,670 ¥443,835 ¥74,967 ¥2,278,473 ¥- ¥2,278,473
Less liquor taxes 358,437 1,237 67 359,743 - 359,743
Net sales 1,401,233 442,597 74,900 1,918,730 - 1,918,730
Inter-segment 26,020 3,596 8,283 37,900 (37,900) -
Total sales 1,427,253 446,193 83,183 1,956,631 (37,900) 1,918,730
Operating expenses 1,318,135 415,142 75,892 1,809,170 (18,874) 1,790,295
Operating income ¥109,118 ¥31,051 ¥7,291 ¥147,461 ¥(19,025) ¥128,435
2. Assets ¥1,613,391 ¥998,601 ¥155,536 ¥2,767,529 ¥93,665 ¥2,861,194
Geographical distances are considered in classification by country or area. Major countries or areas included in each segment except for Japan are as
follows:
Asia, Oceania East Asia, Southeast Asia, Oceania
Others U.S.A., Europe*
* Europe is omitted in 2010
Amounts and major items included in “Eliminations or Corporate” are the same as those described in (a) Business segment information.
As described in Note 2 (1), the fiscal year-ends of Lion Nathan National Foods Pty Ltd (“LNNF”), National Foods Limited (“NFL”) and its
subsidiaries (“the companies”) were changed from December 31 to September 30 from the consolidated year ended December 31, 2010.
To prepare the consolidated financial statements, financial statements of the companies as of September 30, 2010 were used because the difference
between the Company’s and the companies’ year-ends does not exceed three months. However, the profit or loss of the companies for the period
from October 1, 2009 to December 31, 2009 is not included in the Company’s consolidated statement of income for the year ended December 31,
2010 because their profit or loss for that period was included in the Company’s consolidated statement of income for the fiscal year ended
December 31, 2009.
For the three months ended December 31, 2009, sales and operating income of the companies included in the “Asia / Oceania” segment were
¥72,421 million and ¥4,311 million, respectively.
(c) Overseas sales
Year ended December 31, 2010
Asia / Oceania Others Total
(Millions of yen)
Overseas sales, net of liquor taxes ¥424,643 ¥83,964 ¥508,607
Consolidated sales, net of liquor taxes - - 1,835,274
Percentage of overseas sales to consolidated sales 23.1% 4.6% 27.7%
Year ended December 31, 2009
Asia / Oceania Others Total
(Millions of yen)
Overseas sales, net of liquor taxes ¥467,644 ¥94,996 ¥562,640
Consolidated sales, net of liquor taxes - - 1,918,730
Percentage of overseas sales to consolidated sales 24.4% 5.0% 29.3%
Geographical distances are considered in classification by country or area. Major countries or areas included in each segment are as follows:
Asia, Oceania East Asia, Southeast Asia, Oceania
Others U.S.A., Europe*
* Europe is omitted in 2010
Overseas sales represent sales of the Company and its consolidated subsidiaries to countries and areas outside of Japan.
As described in Note 2 (1), the fiscal year-ends of Lion Nathan National Foods Pty Ltd (“LNNF”), National Foods Limited (“NFL”) and its
subsidiaries (“the companies”) were changed from December 31 to September 30 from the consolidated year ended December 31, 2010.
To prepare the consolidated financial statements, financial statements of the companies as of September 30, 2010 were used because the difference
between the Company’s and the companies’ year-ends does not exceed three months. However, the profit or loss of the companies for the period
from October 1, 2009 to December 31, 2009 is not included in the Company’s consolidated statement of income for the year ended December 31,
2010 because their profit or loss for that period was included in the Company’s consolidated statement of income for the fiscal year ended
December 31, 2009.
For the three months ended December 31, 2009, sales of the companies included in the “Asia/Oceania” and “Others” segment were ¥72,210 million
and ¥150 million, respectively.
30
18. LEASE TRANSACTIONS
(a) Lessee - Finance leases
Finance leases, except for those leases under which the ownership of the leased assets is considered to be transferred to the lessee, whose inception
dates were on or before December 31, 2008, are accounted for in the same manner as operating leases. The details are disclosed as follows:
(1) Purchase price equivalents, accumulated depreciation equivalents and book value equivalents of leased assets
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Machinery, equipment and vehicles:
Purchase price equivalents ¥386 ¥1,173 $4,965
Accumulated depreciation equivalents 316 830 4,064
Book value equivalents 70 342 900
Other property, plant and equipment (tools and equipment):
Purchase price equivalents 2,775 4,925 35,695
Accumulated depreciation equivalents 1,991 3,435 25,611
Book value equivalents 783 1,490 10,072
Other intangible assets:
Purchase price equivalents 1,754 1,842 22,562
Accumulated depreciation equivalents 1,083 807 13,931
Book value equivalents 670 1,035 8,618
Total
Purchase price equivalents 4,916 7,942 63,236
Accumulated depreciation equivalents 3,391 5,074 43,619
Book value equivalents ¥1,524 ¥2,868 $19,603
(Note) Some consolidated subsidiaries calculated purchase price equivalents based on the inclusive-of-interest method.
(2) Lease commitments
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Due within one year ¥774 ¥1,308 $9,956
Due over one year 835 1,735 10,740
Total ¥1,610 ¥3,044 $20,710
(Note) Some consolidated subsidiaries calculated lease commitments based on the inclusive-of-interest method.
(3) Lease expenses, depreciation equivalents and interest expense equivalents
Year ended
Year ended December 31, December 31,
2011 2010 2009 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Lease expenses ¥1,201 ¥1,797 ¥2,182 $15,448
Depreciation equivalents 1,048 1,528 1,893 13,480
Interest expense equivalents ¥71 ¥100 ¥143 $913
(4) Calculation method of depreciation equivalents
Depreciation equivalents are calculated using the straight-line method over the lease terms without residual value.
(5) Allocation of interest expense equivalents
Differences between total lease expenses and purchase price equivalents of the leased properties comprise interest expense equivalents and
insurance, maintenance and certain other operating costs. Interest expense equivalents are allocated using the interest method over the lease
terms.
31
(b) Lessee - Operating leases
The Company and its consolidated subsidiaries have lease commitments under non-cancelable operating leases as follows:
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
As a lessee
Due within one year ¥5,772 ¥5,315 $74,247
Due over one year 18,249 22,887 234,744
Total ¥24,021 ¥28,202 308,991
As a lessor
Due within one year ¥202 ¥200 2,598
Due over one year 2,687 2,903 34,563
Total ¥2,890 ¥3,104 $37,175
19. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
Investments in unconsolidated subsidiaries and affiliates at December 31, 2011 and 2010* were as follows:
Year ended
Year ended December 31, December 31,
2011 2010 2011
(Millions of yen) (Thousands of
U.S. dollars)
(Note 1)
Investment securities (Capital stock) ¥290,672 ¥178,146 $3,739,027
Investments and other assets―other (Other than capital stock) ¥1,656 ¥2,449 $21,301
*Figures for 2011 and 2010 include the cost of investment in jointly-controlled companies, amounting to ¥30,174 million ($388,139 thousand)
and ¥27,634 million, respectively.
20. NET ASSETS
Under the Japanese Corporation Law (“the Law”) and related regulations, the entire amount paid for new shares is required to be designated as
common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the
new shares as additional paid-in capital, which is included in capital surplus.
In cases where dividend distribution of surplus is made, the lesser of an amount equal to 10% of the dividend or the excess, if any, of 25% of
common stock over the total of additional paid-in-capital and legal earnings reserve must be set aside as additional paid-in-capital or legal earnings
reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. However, all additional paid-in-capital and all legal
earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the
Company in accordance with the Law.
32
21. NOTES TO THE CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Year ended December 31, 2011
1. Type and number of shares outstanding and treasury stock
Type of shares outstanding Type of treasury stock
Common stock Common stock
Number of shares as of December 31, 2010 965,000,000 3,010,208
Increase during the period ended December 31,
2011 - 504,922
Decrease during the period ended December 31,
2011 - 246,702
Number of shares as of December 31, 2011 965,000,000 3,268,428
Notes:
1. Increase in the number of treasury stock was due to the following reasons:
- Purchases of less-than-one-unit shares: 344,922 shares
- Purchases from opposing shareholders pursuant to Article 797, Paragraph (1) of the Japanese Corporate Law: 160,000 shares
2. Decrease in the number of treasury stock was due to the following reasons:
- Sales of less-than-one-unit shares: 233,929 shares
- Sales of treasury stock by unconsolidated subsidiaries accounted for by the equity method: 12,514 shares
- Decrease due to exclusion of affiliated companies accounted for by the equity method: 259 shares
2. Subscription rights to shares and treasury subscription rights to shares
Description of subscription rights Subscription rights as stock options
Type of shares for subscription rights -
Number of shares for subscription rights
Number of shares as of December 31, 2010 -
Increase during the period ended December 31, -
2011
Decrease during the period ended December 31, -
2011
Number of shares as of December 31, 2011 -
Amount outstanding as of December 31, 2011 ¥250 million ($3,215 thousand)
3. Matters related to dividends
(1) Dividend payments
Approvals by ordinary general meeting of shareholders held on March 29, 2011 were as follows:
Dividend on common stock
a. Total amount of dividend ¥12,025 million ($154,682 thousand)
b. Dividend per share ¥12.50
c. Record date December 31, 2010
d. Effective date March 30, 2011
Approvals by the Board of Directors meeting on August 5, 2011 were as follows:
Dividend on common stock
a. Total amount of dividend ¥12,984 million ($167,018 thousand)
b. Dividend per share ¥13.50
c. Record date June 30, 2011
d. Effective date September 5, 2011
33
(2) Dividends whose record date is attributable to the accounting period ended December 31, 2011 but to be effective after the accounting period
The Company received the approval at the general meeting of shareholders held on March 29, 2012 as follows:
Dividend on common stock
a. Total amount of dividend ¥12,983 million ($167,005 thousand)
b. Funds for dividend Retained earnings
c. Dividend per share ¥13.50
d. Record date December 31, 2011
e. Effective date March 30, 2012
Year ended December 31, 2010
1. Type and number of shares outstanding and treasury stock
Type of shares outstanding Type of treasury stock
Common stock Common stock
Number of shares as of December 31, 2009 984,508,387 31,167,235
Increase during the period ended December 31,
2010 9,257,164 739,822
Decrease during the period ended December 31,
2010 28,765,551 28,896,849
Number of shares as of December 31, 2010 965,000,000 3,010,208
Notes:
1. Increase in the number of shares was due to the issuance of new shares in connection with share exchange.
2. Decrease in the number of shares was due to retirement of treasury stock pursuant to Article 178 of the Japanese Corporate Law.
3. Increase in the number of treasury stock was due to the following reasons:
- Purchases of less-than-one-unit shares: 727,308 shares
- Acquisition of treasury stock by unconsolidated subsidiaries accounted for by equity method due to share exchange: 12,514 shares
4. Decrease in the number of treasury stock was due to the following reasons:
- Retirement of treasury stock pursuant to Article 178 of the Japanese Corporate Law: 28,765,551 shares
- Sales of less-than-one-unit shares: 131,298 shares
2. Subscription rights to shares and treasury subscription rights to shares
Description of subscription rights Subscription rights as stock options
Type of shares for subscription rights -
Number of shares for subscription rights
Number of shares as of December 31, 2009 -
Increase during the period ended December 31, -
2010
Decrease during the period ended December 31, -
2010
Number of shares as of December 31, 2010 -
Amount outstanding as of December 31, 2010 ¥207 million
3. Matters related to dividends
(1) Dividend payments
Approvals by ordinary general meeting of shareholders held on March 26, 2010 were as follows:
Dividend on Common stock
a. Total amount of dividend ¥10,963 million
b. Dividend per share ¥11.50
c. Record date December 31, 2009
d. Effective date March 29, 2010
34
Approvals by the Board of Directors meeting on August 16, 2010 were as follows:
Dividend on Common stock
a. Total amount of dividend ¥11,915 million
b. Dividend per share ¥12.50
c. Record date June 30, 2010
d. Effective date September 6, 2010
(2) Dividends whose record date is attributable to the accounting period ended December 31, 2010 but to be effective after the accounting period
The Company received the approval at the general meeting of shareholders held on March 29, 2011 as follows:
Dividend on Common stock
a. Total amount of dividend ¥12,025 million
b. Funds for dividend Retained earnings
c. Dividend per share ¥12.50
d. Record date December 31, 2010
e. Effective date March 30, 2011
Year ended December 31, 2009
1. Type and number of shares outstanding and treasury stock
Type of shares outstanding Type of treasury stock
Common stock Common stock
Number of shares as of December 31, 2008 984,508,387 30,157,914
Increase during the period ended December 31, - 1,214,018
2009
Decrease during the period ended December 31, - 204,697
2009
Number of shares as of December 31, 2009 984,508,387 31,167,235
Notes:
1. Increase in the number of shares was due to purchases of less-than-one-unit shares.
2. Decrease in the number of shares was due to sales of less-than-one-unit shares.
2. Subscription rights to shares and treasury subscription rights to shares
Description of subscription rights Subscription rights as stock options
Type of shares for subscription rights -
Number of shares for subscription rights
Number of shares as of December 31, 2008 -
Increase during the period ended December 31, -
2009
Decrease during the period ended December 31, -
2009
Number of shares as of December 31, 2009 -
Amount outstanding as of December 31, 2009 ¥196 million
3. Matters related to dividends
(1) Dividend payments
Approvals by ordinary general meeting of shareholders held on March 26, 2009 were as follows:
Dividend on Common stock
a. Total amount of dividend ¥10,975 million
b. Dividend per share ¥11.50
c. Record date December 31, 2008
d. Effective date March 27, 2009
35
Approvals by the Board of Directors meeting on August 6, 2009 were as follows:
Dividend on Common stock
a. Total amount of dividend ¥10,973 million
b. Dividend per share ¥11.50
c. Record date June 30, 2009
d. Effective date September 7, 2009
(2) Dividends whose record date is attributable to the accounting period ended December 31, 2009 but to be effective after the accounting period
The Company received the approval at the general meeting of shareholders held on March 26, 2010 as follows:
Dividend on Common stock
a. Total amount of dividend ¥10,963 million
b. Funds for dividend Retained earnings
c. Dividend per share ¥11.50
d. Record date December 31, 2009
e. Effective date March 29, 2010
22. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Reconciliation of cash
Reconciliation of cash in the consolidated balance sheets and cash and cash equivalents in the consolidated statements of cash flows is as follows:
December 31, December 31,
2011 2010 2009 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Cash ¥76,218 ¥51,463 ¥125,558 $980,421
Marketable securities 6,352 530 128 81,708
Fixed term deposits over 3 months (5,606) (6,512) (6,672) (72,112)
Equity securities and bonds, etc. with maturities exceeding
(6,117) (200) (128) (78,685)
3 months
Short-term loans payable (bank overdraft) - (3) (87) -
Cash and cash equivalents ¥70,847 ¥45,278 ¥118,797 $911,332
(b) Assets and liabilities of subsidiaries excluded from the scope of consolidation
Assets and liabilities of subsidiaries at the time they were excluded from the scope of consolidation, related sale price of shares and proceeds (net)
from sale of shares are as follows:
December 31, December 31,
2011 2010 2009 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Current assets ¥56,348 ¥7,337 ¥2,796 $724,826
Non-current assets 55,765 6,719 5,927 717,326
Current liabilities (59,255) (5,682) (1,095) (762,220)
Non-current liabilities (8,580) (1,137) (716) (110,367)
Valuation difference on available-for-sale securities - - (15) -
Foreign currency translation adjustments 1,990 693 548 25,598
Minority interest (89) (463) - (1,144)
Net gain on sale of shares 9,539 (6,216) 346 122,703
Sales price of shares 55,718 1,250 7,791 716,722
Collection of loans receivable 20,700 - - 266,272
Accounts receivable (417) (398) - (5,364)
Cash and cash equivalents of companies excluded from the
(5,577) (126) (1,729) (71,739)
scope of consolidation
Proceeds from sales of shares of subsidiaries excluded from the
¥70,423 ¥726 ¥6,061 $905,878
scope of consolidation
36
(c) Assets and liabilities of newly consolidated subsidiaries by acquisition of shares
Assets and liabilities of newly consolidated subsidiaries by acquisition of shares at the inception of their consolidation, related acquisition cost and
net expenditure for acquisition of shares are as follows:
December 31, December 31,
2011 2010 2009 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Current assets ¥62,106 ¥- ¥- $798,893
Non-current assets 153,514 - - 1,974,710
Goodwill 214,640 - - 2,760,998
Current liabilities (63,797) - - (820,645)
Non-current liabilities (63,180) - - (812,709)
Foreign currency translation adjustments 44,288 - - 569,693
Minority interest (121) - - (1,556)
Acquisition cost of shares 347,449 - - 4,469,372
Cash and cash equivalents of the acquired companies (3,094) - - (39,799)
Payment for acquisition of shares of newly consolidated
¥344,355 ¥- ¥- $4,429,572
subsidiaries
23. INCOME TAXES
Significant components of deferred tax assets and liabilities as of December 31, 2011 and 2010 were as follows:
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Deferred tax assets:
Employees’ pension and retirement benefits ¥23,018 ¥26,929 $296,089
Depreciation 15,565 21,347 200,218
Loss carried forward 45,878 11,779 590,146
Loss on impairment of fixed assets 5,397 - 69,423
Deemed dividend 8,455 9,243 108,759
Long-term accrued expenses 5,595 6,624 71,970
Deferred charges 5,267 5,593 67,751
Other 76,224 85,941 980,499
Sub-total 185,402 167,460 2,384,898
Less valuation allowance (72,742) (44,690) (935,708)
Total deferred tax assets 112,660 122,769 1,449,189
Deferred tax liabilities:
Adjustment of book value based on fair value (21,912) (24,808) (281,862)
Net unrealized gains on securities (5,812) (7,284) (74,762)
Depreciation of foreign subsidiaries - (6,502) -
Reserve for deferred gains on sale of property (10,843) (12,842) (139,477)
Revaluation of property of foreign subsidiaries (15,780) - (202,984)
Other (11,591) (19,302) (149,099)
Total deferred tax liabilities (65,940) (70,739) (848,211)
Net deferred tax assets 46,719 52,029 600,964
Deferred tax asset due to land revaluation:
Deferred tax asset due to land revaluation 540 617 6,946
Less valuation allowance (540) (617) (6,946)
Total deferred tax asset due to land revaluation - - -
Deferred tax liability due to land revaluation:
Deferred tax liability due to land revaluation (1,286) (1,471) (16,542)
Net deferred tax liability due to land revaluation ¥(1,286) ¥(1,471) $(16,542)
37
Deferred tax assets and liabilities were included in the consolidated balance sheets as of December 31, 2011 and 2010 as follows:
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Current assets ― Deferred tax assets ¥26,303 ¥27,598 $338,345
Non-current assets ― Deferred tax assets 42,234 45,916 543,272
Current liabilities ― Other (6) (16) (77)
Non-current liabilities ― Deferred tax liabilities ¥(21,811) ¥(21,468) $(280,563)
Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the Income Tax Act, etc. for the Purpose of Creating Taxation
System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing Financial
Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117 of 2011), Japanese
corporation tax rates will be reduced and the special reconstruction corporation tax, a surtax for reconstruction funding after the Great East Japan
Earthquake, will be imposed for the fiscal years beginning on or after April 1, 2012. In line with these revisions, the Company changed the statutory
tax rate to calculate deferred tax assets and liabilities from 40.7% to 38.0% for temporary differences which are expected to reverse during the
period from the fiscal year beginning on January 1, 2013 to the fiscal year beginning on January 1, 2015. Similarly, the Company changed the
statutory tax rate to calculate deferred tax assets and liabilities from 40.7% to 35.6% for temporary differences which are expected to reverse from
the fiscal years beginning on or after January 1, 2016.
As a result of this change, net deferred tax assets (after netting deferred tax liabilities) decreased by ¥505 million ($6,496 thousand), and income
taxes - deferred, net unrealized gains on securities and land revaluation difference increased by ¥1,038 million ($13,352 thousand), ¥423 million
($5,441 thousand) and ¥109 million ($1,402 thousand), respectively.
The following table summarizes significant differences between the statutory tax rate and the effective tax rate for the years ended December 31,
2011, 2010 and 2009:
2011 2010 2009
(%) (%) (%)
Statutory tax rate 40.7 40.7 40.7
Adjustments
Permanent difference - expenses 7.1 5.0 4.0
Permanent difference - gross revenue - (2.3) -
Dividends received from foreign subsidiaries eliminated in
consolidation - - 9.7
Amortization of intangible assets 22.7 22.0 13.3
Loss on impairment of intangible assets - 18.0 -
Change in valuation allowance 14.1 4.2 (9.9)
Equity in earnings of affiliates (5.1) (4.8) (3.9)
Gain on negative goodwill - (3.8) -
Difference in tax rate between the Company and its
consolidated subsidiaries - - (7.6)
Retained earnings of foreign subsidiaries - - (6.7)
Tax credits (5.2) (5.6) (6.8)
Others (1.7) (1.4) (1.6)
Effective tax rate 72.6 72.0 31.2
24. FINANCIAL INSTRUMENTS
Effective from the year ended December 31, 2010, the Company has applied the “Accounting Standard for Financial Instruments” (ASBJ Statement
No. 10 of March 10, 2008) and the “Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 of March 10,
2008).
1. Matters related to financial instruments
(1) Policy for financial instruments
The basic policy of the Company and its consolidated subsidiaries is to effectively obtain necessary funds according to changes in business
environment. Currently, funds are mainly obtained through bank borrowings, and issuance of commercial papers and corporate bonds. Temporary
surplus funds are invested in highly secure financial assets such as time deposits. Derivatives are used, not for speculative purpose, but to avoid the
risks mentioned below.
38
(2) Types of financial instruments and related risks
Trade receivables, such as trade notes and accounts receivable, are exposed to customer credit risk. Trade receivables denominated in foreign
currencies arising from global business development are exposed to foreign currency exchange risk. Marketable securities and investment securities,
which mainly consist of stocks issued by companies with which the Company and its consolidated subsidiaries have business relationships, are
exposed to market risk.
Substantially all trade payables, such as trade notes and accounts payables, have payment due dates within one year. Some trade payables
denominated in foreign currencies arising from import of raw materials are exposed to foreign currency exchange risk.
The purpose of short-term loans payable and commercial papers is mainly to fund short-term working capital and the purpose of long-term debt and
loans is mainly to the fund necessary amount for investments and long-term working capital. Some loans payable bear variable interest rates and are
exposed to interest rate fluctuation risk.
Regarding derivatives, the Company and its consolidated subsidiaries enter into forward foreign exchange contracts and currency swaps for the
purpose of hedging foreign currency exchange risk deriving from trade receivables and payables denominated in foreign currencies and loans to
group companies, and interest rate swaps, interest rate cap contracts and interest rate floor contracts for the purpose of hedging interest rate
fluctuation risk deriving from interest payments on debt. Please refer to Note 2 (25) for hedging instruments and hedged items, hedging policy and
method to evaluate hedging effectiveness.
(3) Risk management for financial instruments
(a) Monitoring of credit risk (the default risk for customers and counterparties)
In accordance with the internal policies of the Company and its consolidated subsidiaries for managing credit risk arising from receivables, each
related sales division monitors credit worthiness of their main customers and counterparties on a periodical basis and monitors due dates and
outstanding balances by individual customer. In addition, the Company and its consolidated subsidiaries are making efforts to quickly identify and
mitigate risks of bad debts from customers who are having financial difficulties.
The Company and its consolidated subsidiaries believe that the credit risk of derivatives is insignificant as it enters into derivatives only with
financial institutions which have a high credit rating.
(b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
Regarding trade receivables and payables denominated in foreign currencies, the Company and its consolidated subsidiaries generally utilize
forward foreign exchange contracts to hedge the foreign currency exchange risks identified for each currency on a monthly basis. Currency swaps
are utilized to mitigate interest rate risk on loans denominated in foreign currencies which are made to foreign subsidiaries. In addition, interest rate
swaps, interest rate cap contracts and interest rate floor contracts are utilized to mitigate interest rate fluctuation risk deriving from interest payments
on debt.
For marketable securities and investment securities, the Company and its consolidated subsidiaries periodically review their fair values and the
financial position of the issuers. Additionally, the Company and its consolidated subsidiaries continuously evaluates whether securities other than
those classified as held-to-maturity should be maintained taking into account their fair values and relationships with the issuers.
In conducting and managing derivative transactions, the division in charge of each derivative transaction follows the internal management policies,
which define delegation of authority and position limits. Actual transaction data are regularly reported to the Director of Financial Division.
(c) Monitoring of liquidity risk related to fund procurement (the risk that the Company and its consolidated subsidiaries may not be able to meet
their obligations on scheduled due dates)
In order to manage liquidity risk, the Company and its consolidated subsidiaries timely prepare and update cash flow plans based upon the report
from each division and maintain fund liquidity.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price. When no quoted market price is available, fair value is reasonably
estimated. Since various variable assumptions are reflected in estimating the fair value, different assumptions could result in different fair values. In
addition, the notional amounts of derivatives as stated at 2 below do not reflect the actual market risk exposure involved in derivative transactions.
39
2. Fair values of financial instruments
The table below shows the amounts of financial instruments recorded in the consolidated balance sheet as of December 31, 2011 and 2010, their fair
values, and their differences. Financial instruments whose fair values are deemed extremely difficult to assess are not included.
December 31, 2011
Book value Fair value Difference Book value Fair value Difference
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
ASSETS
(1) Cash ¥76,218 ¥76,218 ¥- $980,421 $980,421 $-
(2) Notes and accounts receivable, trade 406,448 406,448 - 5,228,299 5,228,299 -
(3) Marketable and investment securities
a. Held-to-maturity debt securities 310 312 2 3,987 4,013 25
b. Equity securities issued by affiliates 205,213 471,978 266,765 2,639,735 6,071,237 3,431,502
c. Available-for-sale securities 113,247 113,247 - 1,456,740 1,456,740 -
TOTAL ASSETS 801,438 1,068,206 266,767 10,309,210 13,740,751 3,431,528
LIABILITIES
(1) Notes and accounts payable, trade 146,955 146,955 - 1,890,339 1,890,339 -
(2) Short-term loans payable and long-term
1,100,038 1,100,038 -
debt with current maturities 85,517 85,517 -
(3) Commercial papers 121,989 121,989 - 1,569,192 1,569,192 -
(4) Bonds due within one year 23,111 23,300 188 297,285 299,717 2,418
(5) Liquor taxes payable 91,800 91,800 - 1,180,859 1,180,859 -
(6) Income taxes payable 26,783 26,783 - 344,520 344,520 -
(7) Bonds 365,487 377,803 12,316 4,701,402 4,859,827 158,425
(8) Long-term debt 468,999 473,735 4,736 6,032,917 6,093,838 60,921
TOTAL LIABILITIES 1,330,644 1,347,886 17,241 17,116,593 17,338,384 221,777
Derivative transactions (*) ¥(5,733) ¥(5,733) ¥- $(73,745) $(73,745) $-
(*) Derivatives are stated as the net of assets and liabilities. The figures in parentheses indicate net liabilities.
Notes:
1. Fair value measurement of financial instruments, including securities and derivatives
Assets
(1) Cash and (2) Notes and accounts receivable, trade
The fair value of these items approximates their book value because of their short-term nature.
(3) Marketable securities and investment securities
The fair values of equity securities are measured based on quoted market prices. The fair values of bond securities are measured by the
prices obtained from financial institutions, etc. Please refer to Note 16 for matters relating to securities by holding purpose.
Liabilities
(1) Notes and accounts payable, trade, (2) Short-term loans payable and long-term debt with current maturities, (3) Commercial papers, (5)
Liquor taxes payable, and (6) Income taxes payable
The fair value of these items approximates their book value because of their short-term nature.
(4) Bonds due within one year and (7) Bonds
The fair value of bonds issued by the Company and certain consolidated subsidiaries are based on the market price, when market prices are
readily available. The fair value of bonds without market price is measured as the present value, calculated by discounting the combined
total of principal and interest by a rate with the current maturity and credit risk taken into account.
(8) Long-term debt
The fair value of long-term debt is measured as the present value, calculated by discounting the combined total of principal and interest by
an assumed interest rate for similar new borrowings. However, for long-term debt which is the hedged item for interest rate swaps and
certain hedging criteria are met, the present value of the combined total of principal and interest is discounted by using the rates of relevant
interest rate swaps. For long-term debt to which derivative transactions for which appropriation treatment has been applied, the combined
total of principal and interest considered as the yen-denominated fixed interest borrowing.
40
December 31, 2010
Book value Fair value Difference
(Millions of yen)
ASSETS
(1) Cash ¥51,463 ¥51,463 ¥-
(2) Notes and accounts receivable, trade 415,268 415,268 -
(3) Marketable and investment securities
a. Held-to-maturity debt securities 510 516 6
b. Equity securities issued by affiliates 135,370 420,568 285,197
c. Available-for-sale securities 225,721 225,721 -
TOTAL ASSETS 828,334 1,113,537 285,203
LIABILITIES
(1) Notes and accounts payable, trade 169,036 169,036 -
(2) Short-term loans payable and long-term
debt with current maturities 181,786 181,786 -
(3) Commercial papers 10,999 10,999 -
(4) Bonds due within one year 3,361 3,487 125
(5) Liquor taxes payable 92,553 92,553 -
(6) Income taxes payable 26,544 26,544 -
(7) Bonds 320,070 331,545 11,474
(8) Long-term debt 262,720 266,240 3,519
TOTAL LIABILITIES 1,067,072 1,082,192 15,119
Derivative transactions (*) ¥ (11,017) ¥ (11,017) ¥-
(*) Derivatives are stated as the net of assets and liabilities. The figures in parentheses indicate net liabilities.
Notes:
1. Fair value measurement of financial instruments, including securities and derivatives
Assets
(1) Cash and (2) Notes and accounts receivable, trade
The fair value of these items approximates their book value because of their short-term nature.
(3) Marketable securities and investment securities
The fair values of equity securities are measured based on quoted market prices. The fair values of bond securities are measured by the
prices obtained from financial institutions. Please refer to Note 16 for matters relating to securities by holding purpose.
Liabilities
(1) Notes and accounts payable, trade, (2) Short-term loans payable and long-term debt with current maturities, (3) Commercial papers, (5)
Liquor taxes payable, and (6) Income taxes payable
The fair value of these items approximates their book value because of their short-term nature.
(4) Bonds due within one year and (7) Bonds
The fair value of bonds issued by the Company and certain consolidated subsidiaries are based on the market price, when market prices are
readily available. The fair value of bonds without market price is measured as the present value, calculated by discounting the combined
total of principal and interest by a rate with the current maturity and credit risk taken into account.
(8) Long-term debt
The fair value of long-term debt is measured as the present value, calculated by discounting the combined total of principal and interest by
an assumed interest rate for similar new borrowings. For long-term debt which is the hedged item for interest rate swaps and certain
hedging criteria are met, the present value of the combined total of principal and interest is discounted by using the rates of relevant interest
rate swaps.
Derivative transactions
Please refer to Note 25 below.
41
2. Book values of financial instruments for which fair values are deemed extremely difficult to assess are as follows:
Classification December 31, December 31,
2011 2010 2011
(Millions of yen) (Thousands of U.S.
dollars) (Note 1)
Investment securities
a. Unlisted equity securities (Equity securities issued by affiliates and ¥85,459 ¥42,775
$1,099,292
others)
b. Unlisted equity securities (Other securities) 19,709 24,502 253,524
c. Other 31 33 398
Investment and other assets - other
Investments in equity of affiliates and others 1,656 - 21,301
Guarantee deposits received ¥73,222 ¥73,663 $941,883
The fair values of these items are not shown in the table above because their market prices are not available and the fair values are deemed
extremely difficult to assess.
3. Redemption schedules for monetary receivables and marketable securities with maturities as of December 31, 2011 and 2010 are as follows:
Due within 1 to 5 5 to 10 Over 10 Due within 1 to 5 5 to 10 Over 10
2011 1 year years years years 1 year years years years
(Millions of yen) (Thousands of U.S. dollars) (Note 1)
Cash and time deposits ¥76,218 ¥- ¥- ¥- $980,421 $- $- $-
Notes and accounts receivable, trade 406,448 - - - 5,228,299 - - -
Marketable and investment securities
Held-to-maturity debt securities
Governmental/municipal bonds 200 110 - - 2,572 1,414 - -
Available-for-sale securities with
maturity
Debt securities (others) 2,647 2,163 - - 34,049 27,823 - -
Others 756 331 - - 9,724 4,257 - -
TOTAL ¥486,271 ¥2,604 ¥- ¥- $6,255,093 $33,496 $- $-
Due within 1 to 5 5 to 10 Over 10
2010 1 year years years years
(Millions of yen)
Cash and time deposits ¥51,463 ¥- ¥- ¥-
Notes and accounts receivable, trade 415,268 - - -
Marketable and investment securities
Held-to-maturity debt securities
Governmental/municipal bonds 200 310 - -
TOTAL ¥466,932 ¥310 ¥- ¥-
4. Please refer to Note 3 for the aggregate annual maturities of long-term debt, bonds and finance lease obligation at December 31, 2011 and 2010.
42
25. DERIVATIVE TRANSACTIONS
1. Notional amount and fair value of derivative transactions for which hedge accounting has not been applied for the years ended December 31,
2011 and 2010 are summarized as follows:
Currency-related transactions
December 31, 2011
Portion Portion due
due after after one
Notional Fair Unrealized Notional Unrealized
Classification Type of transaction one year year Fair value
amount value gain (loss) amount gain (loss)
included included
therein therein
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Non-market Foreign exchange
transactions forward contracts
Sell
US dollar ¥2,727 ¥- ¥(2) ¥(2) $35,078 $- $(25) $(25)
Euro 1,309 - 47 47 16,838 - 604 604
Buy
US dollar 604 - 57 57 7,769 - 733 733
Euro 106 - 4 4 1,363 - 51 51
Currency swap
Receive yen, pay
US dollar 7,774 - 2 2 100,000 - 25 25
Receive yen, pay
GBP 7,129 - 43 43 91,703 - 553 553
Receive US
dollar pay BRL 3,781 - 350 350 48,636 - 4,502 4,502
Total ¥23,433 ¥- ¥501 ¥501 $301,427 $- $6,444 $6,444
Fair value is based on the prices obtained from forward exchange market or financial institutions.
December 31, 2010
Portion
due after
Notional Fair Unrealized
Classification Type of transaction one year
amount value gain (loss)
included
therein
(Millions of yen)
Non-market Foreign exchange
transactions forward contracts
Sell
US dollar ¥3,229 ¥- ¥60 ¥60
Euro 2,155 - 58 58
Currency swap
Receive yen, pay
Australian dollar 17,203 - (1,301) (1,301)
Receive yen,
pay US dollar 3,006 - 74 74
Total ¥25,595 ¥- ¥(1,106) ¥(1,106)
Fair value is based on the prices obtained from forward exchange market or financial institutions.
43
Interest-rate related transactions
December 31, 2011
Portion due Portion due
after one after one
Notional Fair Unrealized Notional Unrealized
Classification Type of transaction year year Fair value
amount value gain (loss) amount gain (loss)
included included
therein therein
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Non-market Interest rate swap
transactions Receive fixed,
pay floating ¥888 ¥- ¥7 ¥7 $11,422 $- $90 $90
Receive floating,
pay fixed 888 - (8) (8) 11,422 - (102) (102)
Total ¥1,777 ¥- ¥(1) ¥(1) $22,858 $- $(12) $(12)
Fair value is based on the prices obtained from financial institutions.
December 31, 2010
Portion due
after one
Notional Fair Unrealized
Classification Type of transaction year
amount value gain (loss)
included
therein
(Millions of yen)
Non-market Interest rate swap
transactions Receive fixed,
pay floating ¥931 ¥931 ¥32 ¥32
Receive floating,
pay fixed 931 931 (39) (39)
Total ¥1,862 ¥1,862 ¥(7) ¥(7)
Fair value is based on the prices obtained from financial institutions.
Commodity-related transactions
December 31, 2011
Portion due Portion due
after one after one
Notional Fair Unrealized Notional Unrealized
Classification Type of transaction year year Fair value
amount value gain (loss) amount gain (loss)
included included
therein therein
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Non-market Commodity swap
transactions Receive floating,
pay fixed ¥751 ¥- ¥(196) ¥(196) $9,660 $- $(2,521) $(2,521)
Total ¥751 ¥- ¥(196) ¥(196) $9,660 $- $(2,521) $(2,521)
Fair value is based on the prices obtained from financial institutions.
44
2. The notional amount and fair value of derivative transactions for which hedge accounting has been applied are summarized as follows:
Currency-related transactions
December 31, 2011
Portion due
Portion due
Notional after one year Fair Notional Fair value
Type of transaction Hedged item after one year
amount included value amount
included therein
therein
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Derivative transactions for which deferral hedge accounting has been applied
Foreign exchange Future transactions
forward contracts in foreign currency
Sell
NZ dollar ¥9,762 ¥- ¥103 $125,572 $- $1,324
GBP 722 - (23) 9,287 - (295)
Australian dollar 686 - 19 8,824 - 244
US dollar 644 - 23 8,284 - 295
Other 569 - (0) 7,319 - (0)
Buy
US dollar 11,260 955 15 144,841 $12,284 192
Euro 4,254 550 (56) 54,720 7,074 (720)
Currency swap Debt and bonds
Receive US dollar,
pay Australian dollar 27,830 23,308 (7,571) 357,988 299,819 (97,388)
Receive yen,
pay Australian
dollar 25,704 25,704 4,854 330,640 330,640 62,438
Derivative transactions for which appropriation treatment has been applied
Foreign exchange Payables
forward contracts
Buy
US dollar 46 - Note 2 591 - Note 2
Currency swap Long-term debt
Receive US
dollar, pay yen 90,000 90,000 Note 3 1,157,705 1,157,705 Note 3
TOTAL ¥171,482 ¥140,519 ¥(2,635) $2,205,839 $1,807,550 $(33,895)
Note: 1. Fair value is based on the prices obtained from forward exchange market or financial institutions.
2. Foreign exchange forward contracts for which appropriation treatment has been applied are accounted for together with payables
designated as the hedged item. Therefore, their fair values are included in the fair value of the hedged payables.
3. Foreign exchange forward contracts for which appropriation treatment has been applied are accounted for together with long-term debt
designated as a hedged item, therefore, their fair values are included in the fair value of the hedged long-term debt.
45
December 31, 2010
Portion due
Notional after one year Fair
Type of transaction Hedged item
amount included value
therein
(Millions of yen)
Derivative transactions for which deferral hedge accounting has been applied
Foreign exchange Future transactions
forward contracts in foreign currency
Sell
US dollar ¥216 ¥- ¥26
Euro 28 - 0
Australian dollar 341 62 (9)
GBP 726 - 25
Other 630 - 39
Buy
US dollar 8,397 2,022 (782)
Euro 2,724 185 (179)
Other 113 - (3)
Currency swap Debt and bonds
Receive US dollar,
pay Australian dollar 35,055 30,155 (9,196)
Receive yen,
pay Australian
dollar 27,851 27,851 3,053
Derivative transactions for which appropriation treatment has been applied
Foreign exchange Receivables and
forward contracts payables
Sell
US dollar 1,007 - Note 2
Euro 78 - Note 2
Buy
Euro 4 - Note 2
TOTAL ¥77,178 ¥60,277 ¥(7,026)
Note: 1. Fair value is based on the prices obtained from forward exchange market or financial institutions.
2. Foreign exchange forward contracts for which appropriation treatment has been applied are accounted for together with receivables and
payables designated as the hedged item, therefore, their fair values are included in the fair value of the hedged receivables and payables.
46
Interest-rate related transactions
December 31, 2011
Portion due
Portion due
Notional after one year Fair Notional Fair value
Type of transaction Hedged item after one year
amount included value amount
included therein
therein
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Derivative transactions for which deferral hedge accounting has been applied
Interest rate swap Debt and bonds
Receive floating,
pay fixed ¥70,297 ¥57,889 ¥(3,057) $904,257 $744,648 $(39,323)
Interest rate cap
Buy 5,923 5,923 0 76,189 76,189 0
Interest rate floor
Sell 5,923 5,923 (391) 76,189 76,189 (5,029)
Derivative transactions for which special treatment has been applied
Interest rate swap Long-term debt
Receive floating,
pay fixed 295,794 265,697 Note 2 3,804,913 3,417,764 Note 2
TOTAL ¥377,939 ¥335,433 ¥(3,448) $4,861,577 $4,314,805 $(44,352)
Note: 1. Fair value is based on the prices obtained from financial institutions.
2. Interest rate swaps for which special treatment has been applied are accounted for together with long-term debt designated as the hedged
item, therefore, their fair values are included in the fair value of the hedged long-term debt.
December 31, 2010
Portion due
Notional after one year Fair
Type of transaction Hedged item
amount included value
therein
(Millions of yen)
Derivative transactions for which deferral hedge accounting has been applied
Interest rate swap Debt and bonds
Receive floating,
pay fixed ¥81,840 ¥75,966 ¥(2,538)
Interest rate cap
Buy 6,208 - 1
Interest rate floor
Sell 6,208 - (475)
Derivative transactions for which special treatment has been applied
Interest rate swap Long-term debt
Receive floating,
pay fixed 106,405 95,803 Note 2
TOTAL ¥200,663 ¥171,770 ¥(3,012)
Note: 1. Fair value is based on the prices obtained from financial institutions.
2. Interest rate swaps for which special treatment has been applied are accounted for together with long-term debt designated as the hedged
item, therefore, their fair values are included in the fair value of the hedged long-term debt.
47
Commodity-related transactions
December 31, 2011
Portion due
Portion due
Notional after one year Fair Notional Fair value
Type of transaction Hedged item after one year
amount included value amount
included therein
therein
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Derivative transactions for which deferral hedge accounting has been applied
Commodity swap Sugar
Receive floating,
pay fixed ¥82 ¥- ¥46 $1,054 $- $591
TOTAL ¥82 ¥- ¥46 $1,054 $- $591
Note:1. Fair value is based on the prices obtained from financial institutions.
December 31, 2010
Portion due
Notional after one year Fair
Type of transaction Hedged item
amount included value
therein
(Millions of yen)
Derivative transactions for which deferral hedge accounting has been applied
Commodity swap Sugar, etc.
Receive floating,
pay fixed ¥765 ¥89 ¥135
TOTAL ¥765 ¥89 ¥135
Note:1. Fair value is based on the prices obtained from financial institutions.
26. EMPLOYEES’ PENSION AND RETIREMENT BENEFITS
The Company and its consolidated domestic subsidiaries provide four types of contributory defined benefit plans, namely: lump-sum severance
payment plan; defined benefit corporate pension plan; employees’ pension fund plan; and tax-qualified pension plan. The Company and several
consolidated subsidiaries provide defined contribution plans and/or defined benefit plans. Extra payments may be added upon retirement of
employees.
(a) Liabilities for employees’ pension and retirement benefits
The liabilities for employees’ pension and retirement benefits included in the liability section of the consolidated balance sheets as of December 31,
2011 and 2010 consisted of the following:
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Projected benefit obligation ¥(298,939) ¥(295,017) $(3,845,369)
Fair value of plan assets 182,230 190,856 2,344,095
Unfunded pension obligation (116,708) (104,160) (1,501,260)
Unrecognized actuarial differences 59,262 46,545 762,310
Unrecognized prior service cost (deduction of obligation) (1,248) (1,600) (16,053)
Net amount (58,693) (59,215) (754,990)
Prepaid pension cost 6,822 7,667 87,754
Employees’ pension and retirement benefits ¥(65,516) ¥(66,882) $(842,757)
A number of consolidated subsidiaries calculated projected benefit obligations using a simplified method.
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(b) Employees’ pension and retirement benefits expenses
The employees’ pension and retirement benefit expenses included in the consolidated statements of income for the years ended December 31, 2011,
2010 and 2009 consisted of the following:
Year ended
For the year ended December 31, December 31,
2011 2010 2009 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Service cost ¥9,519 ¥12,683 ¥12,169 $122,446
Interest cost 7,015 7,366 7,435 90,236
Expected return on plan assets (4,948) (5,140) (4,729) (63,648)
Amortization of actuarial differences 7,014 6,932 9,452 90,223
Amortization of prior service cost (327) (323) (447) (4,206)
Premium for defined contribution pension plans 4,128 4,652 1,234 53,100
Employees’ pension and retirement benefit expenses 22,401 26,170 25,115 288,152
Loss on revision of retirement benefit plan - 7,226 - -
Total ¥22,401 ¥33,397 ¥25,115 $288,152
Employees’ contribution to the defined benefit corporate pension plan and others is excluded for the years ended December 31, 2011, 2010 and
2009. Employees’ pension and retirement benefit expenses of consolidated subsidiaries calculated using a simplified method are included for the
years ended December 31, 2011, 2010 and 2009.
In addition to the above employees’ pension and retirement benefit expenses, additional employees’ retirement benefits and others were recognized
as “Business restructuring expense” in special expenses, amounting to ¥973 million ($12,516 thousand), ¥3,502 million and ¥ 1,363 million for the
years ended December 31, 2011, 2010 and 2009, respectively, and as “Other” in special expenses amounting to ¥1,509 million ($19,410 thousand)
for the year ended December 31, 2011. In addition, income on the partial termination of retirement plan of certain subsidiaries and others were
recognized as “Other” in special income amounting to ¥480 million ($6,174 thousand) for the year ended December 31, 2011.
For the year ended December 31, 2010, loss on revision of retirement plan was recognized mainly due to the partial abolishment of the lump-sum
severance payment plan of the Company and its consolidated subsidiaries.
Assumptions used for the years ended December 31, 2011, 2010 and 2009 were as follows:
December 31,
2011 2010 2009
Discount rate Mainly 1.7-2.5% Mainly 2.5% Mainly 2.5%
Expected rate of return on plan assets Mainly 2.5% Mainly 2.5% Mainly 2.5%
Amortization of unrecognized prior service cost Mainly 5-15 years Mainly 5-15 years Mainly 5-15 years
Amortization of unrecognized actuarial differences Mainly 10-15 years Mainly 10-15 years Mainly 10-15 years
The estimated amount of all retirement benefits to be paid at the future retirement dates is allocated equally to each service year using the estimated
number of total service years.
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27. STOCK OPTIONS
For the year ended December 31, 2011
1. Amount of expenses related to the stock option plans for the year ended December 31, 2011 and the account recorded
Selling, general and administrative expenses ¥86 million ($1,106 thousand)
2. Stock options outstanding as of December 31, 2011 are as follows:
Consolidated Subsidiary (Kyowa Hakko Kirin Co., Ltd.)
Stock Option Grantees’ Position Number of Options Granted Date of Grant Exercise Price
6 directors Common stock
2005 Stock Option June 28, 2005 ¥1 ($0.012)
13 managing officers 133,000 shares
7 directors Common stock
2006 Stock Option June 29, 2006 ¥1 ($0.012)
11 managing officers 111,000 shares
5 directors Common stock
2007 Stock Option June 21, 2007 ¥1 ($0.012)
13 managing officers 92,000 shares
6 directors Common stock
2008 Stock Option June 25, 2008 ¥1 ($0.012)
14 managing officers 91,000 shares
6 directors Common stock
2009 Stock Option June 26, 2009 ¥1 ($0.012)
8 managing officers 93,000 shares
6 directors Common stock
2010 Stock Option April 1, 2010 ¥1 ($0.012)
11 managing officers 85,000 shares
6 directors Common stock
2011 Stock Option April 1, 2011 ¥1 ($0.012)
14 managing officers 119,000 shares
Stock Option Vesting condition Applicable period of service Exercisable period
2005 Stock Option No provisions No provisions June 29, 2005 - June 28, 2025
2006 Stock Option No provisions No provisions June 30, 2006 - June 28, 2026
2007 Stock Option No provisions No provisions June 22, 2007 - June 20, 2027
2008 Stock Option No provisions No provisions June 26, 2008 - June 24, 2028
2009 Stock Option No provisions No provisions June 27, 2009 - June 25, 2029
2010 Stock Option No provisions No provisions April 2, 2010 - March 24, 2030
2011 Stock Option No provisions No provisions April 2, 2011 - March 24, 2031
(Note) Number of subscription rights to shares is expressed in number of shares to be issued upon exercise.
Number and movement of stock options
The following tables are based on the stock options which existed as of December 31, 2011. Number of stock options is expressed in number of
shares to be issued upon exercise.
Number of Stock Options
2005 Stock 2006 Stock 2007 Stock 2008 Stock 2009 Stock 2010 Stock 2011 Stock
Option Option Option Option Option Option Option
Number of Number of Number of Number of Number of Number of Number of
shares shares shares shares shares shares shares
Non-vested
Outstanding
- - - - - - -
at December 31, 2010
Granted - - - - - - 119,000
Forfeited - - - - - - -
Vested - - - - - - 119,000
Outstanding
- - - - - - -
at December 31, 2011
Vested
Outstanding
32,000 32,000 23,000 31,000 66,000 85,000 -
at December 31, 2010
Vested - - - - - - 119,000
Exercised 7,000 6,000 5,000 9,000 14,000 10,000 -
Forfeited - - - - - - -
Outstanding
25,000 26,000 18,000 22,000 52,000 75,000 119,000
at December 31, 2011
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3. Price information of stock options as of December 31, 2011
2005 Stock 2006 Stock 2007 Stock 2008 Stock 2009 Stock 2010 Stock 2011 Stock
Option Option Option Option Option Option Option
Exercise price (yen) 1 1 1 1 1 1 1
Average market price of
the stock at the time of 777 777 777 777 777 777 -
exercise (yen)
Fair valuation price (date
- 705 1,140 1,038 1,014 940 741
of grant) (yen)
4. Method of estimating the fair value of stock options
The fair value of the 2011 Stock Option is estimated using the Black-Scholes model. The following assumptions were used to determine the fair
value.
Share price variability (Note 1) 6.4%
Projected remaining period (Note 2) 2 years
Projected dividend (Note 3) ¥20 per share
Risk-free interest rate (Note 4) 0.53%
(Notes) 1. Calculated based on share price results over two years (from April 2009 to March 2011).
2. Calculated by subtracting the average years of service of present office holders from the average years of service of retirees over the past
five years.
3. The projected dividend for the year ended December 31, 2011.
4. The rate of return on government bonds over the projected remaining period.
5. Method of reflecting actual expirations are used because reasonable estimations of the future expirations are difficult.
For the year ended December 31, 2010
1. Amount of expenses related to the stock option plans for the year ended December 31, 2010 and the account recorded
Selling, general and administrative expenses ¥82 million
2. Stock options outstanding as of December 31, 2010 are as follows:
Consolidated Subsidiary (Kyowa Hakko Kirin Co., Ltd.)
Stock Option Grantees’ Position Number of Options Granted Date of Grant Exercise Price
6 directors Common stock
2005 Stock Option June 28, 2005 ¥1
13 managing officers 133,000 shares
7 directors Common stock
2006 Stock Option June 29, 2006 ¥1
11 managing officers 111,000 shares
5 directors Common stock
2007 Stock Option June 21, 2007 ¥1
13 managing officers 92,000 shares
6 directors Common stock
2008 Stock Option June 25, 2008 ¥1
14 managing officers 91,000 shares
6 directors Common stock
2009 Stock Option June 26, 2009 ¥1
8 managing officers 93,000 shares
6 directors Common stock
2010 Stock Option April 1, 2010 ¥1
11 managing officers 85,000 shares
Applicable period
Stock Option Vesting condition Exercisable period
of service
2005 Stock Option No provisions No provisions June 29, 2005 - June 28, 2025
2006 Stock Option No provisions No provisions June 30, 2006 - June 28, 2026
2007 Stock Option No provisions No provisions June 22, 2007 - June 20, 2027
2008 Stock Option No provisions No provisions June 26, 2008 - June 24, 2028
2009 Stock Option No provisions No provisions June 27, 2009 - June 25, 2029
2010 Stock Option No provisions No provisions April 2, 2010 - March 24, 2030
(Note) Number of subscription rights to shares is expressed in number of shares to be issued upon exercise.
Number and movement of stock options
The following tables are based on the stock options which existed as of December 31, 2010. Number of stock options is expressed in number of
shares to be issued upon exercise.
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Number of Stock Options
2005 Stock 2006 Stock 2007 Stock 2008 Stock 2009 Stock 2010 Stock
Option Option Option Option Option Option
Number of Number of Number of Number of Number of Number of
shares shares shares shares shares shares
Non-vested
December 31, 2009-Outstanding - - - - - -
Granted - - - - - 85,000
Forfeited - - - - - -
Vested - - - - - 85,000
December 31, 2010-Outstanding - - - - - -
Vested
December 31, 2009-Outstanding 40,000 39,000 37,000 53,000 93,000 -
Vested - - - - - 85,000
Exercised 8,000 7,000 14,000 22,000 27,000 -
Forfeited - - - - - -
December 31, 2010-Outstanding 32,000 32,000 23,000 31,000 66,000 85,000
3. Price information of stock options as of December 31, 2010
2005 Stock 2006 Stock 2007 Stock 2008 Stock 2009 Stock 2010 Stock
Option Option Option Option Option Option
Exercise price (yen) 1 1 1 1 1 1
Average market price of the stock
957 957 957 957 957 -
at the time of exercise (yen)
Fair valuation price (date of grant)
- 705 1,140 1,038 1,014 940
(yen)
4. Method of estimating the fair value of stock options
The fair value of the 2010 Stock Option is estimated using the Black-Scholes model. The following assumptions were used to determine the fair
value.
Share price variability (Note 1) 10.2%
Projected remaining period (Note 2) 2 years
Projected dividend (Note 3) ¥20 per share
Risk-free interest rate (Note 4) 0.69%
(Notes) 1. Calculated based on share price results over two years (from March 2008 to February 2010).
2. Calculated by subtracting the average years of service of present office holders from the average years of service of retirees over the past
five years.
3. The projected dividend for the year ended December 31, 2010.
4. The rate of return on government bonds over the projected remaining period.
5. Method of reflecting actual expirations are used because reasonable estimations of the future expirations are difficult.
28. REVALUATION OF LAND
Kirin Beverage Co., Ltd., a consolidated subsidiary, revalued land used for business on December 31, 2001 pursuant to the Law Concerning Land
Revaluation (enacted on March 31, 1998) (“the Law”) and related revision of “the Law” (effective March 31, 2001).
Due to revaluation of land, the revaluation difference attributable to the interests held by the Company was accounted for as “Land revaluation
difference” in net assets.
Revaluation was performed by adjusting the road rating pursuant to Article 2, Item 4 of the Enforcement Ordinance for the Law Concerning
Revaluation Reserve for Land enacted on March 31, 1998. Where the road rating was not provided, adjusted valuation for real estate tax prescribed
in Article 2, Item 3 of the Law was used.
December 31, December 31,
2011 2010 2011
(Thousands of
(Millions of yen) U.S. dollars)
(Note 1)
Difference between the fair value and carrying amount of the revalued land ¥5,182 ¥5,480 $66,658
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29. RELATED PARTY TRANSACTIONS
1. Transactions with related parties
Disclosure is omitted since there are no material related party transactions.
2. Notes relating to the parent company and major affiliate
Summarized financial information of major affiliate
As of December 31, 2011 and 2010, SAN MIGUEL BREWERY INC. (“SAN MIGUEL”), whose fiscal year-end is December 31, is the major
affiliate of the Company. SAN MIGUEL’S summarized financial information is shown below. The balance sheet items are based on the position as
of the third quarter end of SAN MIGUEL, and the statement of income item are based on the results of the 12 month period from the previous third
quarter to the current third quarter of SAN MIGUEL, which are the amounts used in preparing the consolidated financial statements of the
Company.
December 31,
2011 2010 2011
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Total Current Assets ¥48,161 ¥57,971 $619,513
Total Non-current Assets 100,783 103,592 1,296,411
Total Deferred Assets 10,405 10,835 133,843
Total Current Liabilities 44,664 19,765 574,530
Total Non-current Liabilities 67,417 99,748 867,211
Total Net Assets 47,269 52,885 608,039
Sales 133,137 123,284 1,712,593
Income before income taxes and minority interests 24,090 37,165 309,879
Net income ¥17,309 ¥27,420 $222,652
30. BUSINESS COMBINATIONS
For the year ended December 31, 2011
The Company acquired the total outstanding shares in Schincariol Participações e Representações S.A., the controlling shareholder of Schincariol
Group companies which conduct beer business and soft drinks business, including carbonated drinks, in Brazil.
This acquisition will enable the Company to increase the competitiveness of Schincariol Group in the fast-growing Brazilian market and generate
synergies with the Kirin Group, through which the Company seeks to accelerate growth.
1. Name and business description of acquired company, major reasons for business combination, date of business combination, legal description of
business combination, trade name and share of acquired voting rights after business combination and major reasons for the decision on
acquiring the company
(1) Name and business description of acquired company
Name of acquired company: Schincariol Participações e Representações S.A.
Business description: Holding company (production and sale of beer and soft drinks through subsidiaries)
(2) Major reasons for business combination: See above
(3) Date of business combination: October 11, 2011
(4) Legal description of business combination: Acquisition of shares
(5) Trade name after business combination: Schincariol Participações e Representações S.A.
(6) Share of voting rights acquired: 100%
(7) Major reasons for the decision on acquiring the company
Due to the acquisition of shares in compensation for cash consideration by Kirin Holdings Investments Brasil Participações S.A., the
Company’s wholly-owned subsidiary.
2. Period of operating results of the acquired company included in the consolidated financial statements
No operating results for the period prior to December 31, 2011, the deemed acquisition date, were included in the consolidated financial
statements.
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3. Acquisition cost of the acquired company
(Millions of yen) (Thousands of U.S.
dollars)
(Note 1)
Consideration for acquisition ¥303,283 $3,901,247
Expenditure directly required for acquisition 1,081 13,905
Acquisition cost ¥304,365 $3,915,165
4. Amounts of assets and liabilities received and assumed on the date of business combination
(Millions of yen) (Thousands of U.S.
dollars)
(Note 1)
Current assets ¥54,210 $697,324
Non-current assets 127,772 1,643,581
Total assets 181,983 2,340,918
Current liabilities 45,093 580,048
Non-current liabilities 57,933 745,214
Total liabilities ¥103,027 $1,325,276
(Note) The amounts of assets and liabilities do not include 6. (1) “Amount of goodwill recognized” stated below.
5. Allocation of acquisition cost
Allocation of acquisition costs has not been completed, as the fair value of assets and liabilities of the acquired company have not been determined.
6. Amount of goodwill, reason that the goodwill arose, and method and period of amortization
(1) Amount of goodwill: ¥182,714 million (BRL 4,408,076 thousand)
The above figures are estimated amounts as the allocation of acquisition costs has not been completed.
(2) Reason that the goodwill arose
The goodwill arose from the future increase in profitability that is expected as a result of expanding business.
(3) Method and period of amortization: Straight-line method over a period of 20 years.
7. Estimated impact on the consolidated statement of income for the current fiscal year, assuming the business combination had been completed at
the beginning of the current fiscal year.
(Millions of yen) (Thousands of U.S. dollars)
(Note 1)
Sales ¥151,741 $1,951,903
Net loss 15,039 193,452
Net loss per share 15.63 yen 0.20 dollar
Basis for calculation of estimate and significant assumptions
1. The estimated amount of impact is the difference between sales and profit and loss information calculated on the assumption that the
business combination was completed as of the beginning of the fiscal year ended December 31, 2011 and those included in the
Company’s consolidated statement of income for the year ended December 31, 2011.
2. Net loss per share is based on 961,805,552 shares, the average number of shares outstanding for the period ended December 31, 2011.
3. The amounts above are unaudited.
For the year ended December 31, 2010
1. Trade name and business description of acquired company, legal description of business combination, trade name after business combination and
main purpose for business combination
(1) Trade name and business description of acquired company
Acquired company: Mercian Corporation
Business description: Production and sales of wines and other alcohol beverages, chemical products, pharmaceutical products and livestock and
fish feedstuff products.
(2) Legal description of business combination: Share Exchange
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(3) Trade name after business combination: Mercian Corporation
(4) Main purpose for business combination
Mercian was required to correct its financial statements for previous fiscal years due to the discovery of an inappropriate transaction in the Fish
Feedstuffs Division in May 2010. In response to this, the Company determined that Mercian’s management base and corporate governance
urgently require reinforcement, and decided to make Mercian its wholly owned subsidiary.
Accordingly, the Company and Mercian entered into the “Share Exchange Agreement,” making Mercian the Company’s wholly-owned
subsidiary (the Share Exchange) on August 27, 2010. The Company completed procedures for making Mercian its wholly-owned subsidiary on
December 1, 2010.
2. Overview of accounting treatment applied
The Share Exchange was accounted for as a transaction under common control in accordance with the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 of December 26, 2008) and the “Guidance on Accounting Standard for Business Combinations and
Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10 of December 26, 2008).
3. Matters related to additional acquisition of the subsidiary’s shares
(1) Acquisition cost of acquired company
Consideration for acquisition (the Company’s common stock) ¥10,543 million
Expenditure directly required for acquisition ¥372 million
Acquisition cost ¥10,916 million
(2) Share exchange ratio by type of share, the basis for its calculation and the number of shares delivered
(a) Share exchange ratio by type of share
Common stock one share of the Company: 0.14 share of Mercian
(b) Basis for calculation of share exchange ratio
In order to ensure fairness and reasonableness of the share exchange ratio for the Share Exchange, each of the Company and Mercian
requested a separate independent third-party valuation providers to calculate a share exchange ratio. The Company and Mercian resolved the
share exchange ratio by engaging in negotiations and discussions based on the analysis provided by the third-party valuation providers, and
bearing in mind their respective financial conditions, performance trends, stock price movements and other factors.
(c) Number of shares of the Company delivered: 9,257,164 shares
(3) Amount of gain on negative goodwill and reason that the gain on negative goodwill was recognized
(a) Amount of gain on negative goodwill: ¥6,710 million
(b) Reason that the gain on negative goodwill was recognized
Gain on negative goodwill was recognized since the additional acquisition cost of Mercian’s common stock was less than the decrease in
minority interest corresponding to the Share Exchange.
31. SUBSEQUENT EVENTS
There are no significant subsequent events.
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